Suzaki Manufacturing Company is considering three new projects, each requiring a

Question

Suzaki Manufacturing Company is considering three new projects, each requiring an equipment investment of $22,000. Each project will last for 3 years and produce the following cash inflows. Year AA BB CC 1 $ 7,000 $ 9,500 $13,000 2 9,000 9,500 10,000 3 15,000 9,500 9,000 Total $31,000 $28,500 $32,000 The equipment's salvage value is zero. Suzaki uses straight-line depreciation. Suzaki will not accept any project with a payback period over 2 years. Suzaki's minimum required rate of return is 12%. Instructions Compute each project's payback period, indicating the most desirable project and the least desirable project using this method. (Round answers to 2 decimal places, e.g. 10.50.) AA Entry field with incorrect answer 2.8 years Entry field with incorrect answer BB Entry field with incorrect answer 2.88 years Entry field with incorrect answer CC Entry field with incorrect answer 2.4 years Entry field with correct answer Compute the net present value of each project, indicating the most desirable project and the least desirable project using this method. (Round computations and final answers to 0 decimal places, e.g. 125.) AA $Entry field with incorrect answer 52457 Entry field with correct answer BB $Entry field with incorrect answer 46452 Entry field with correct answer CC $Entry field with incorrect answer 54859 Entry field with correct answer

Explanation / Answer

AA Payback period CashFlow Cumulative Cashflow 0 -$22,000 -$22,000 1 $7,000 -$15,000 2 $9,000 -$6,000 3 $15,000 Payback period = 2 years + $6000/$15000 2.40 years least desirable BB Payback period CashFlow Cumulative Cashflow 0 -$22,000 -$22,000 1 $9,500 -$12,500 2 $9,500 -$3,000 3 $9,500 Payback period = 2 years + $3000/$9500 2.32 years middle CC BB Payback period CashFlow Cumulative Cashflow 0 -$22,000 -$22,000 1 $13,000 -$9,000 2 $10,000 $1,000 3 $9,000 Payback period = 1 years + $9000/$10000 1.90 years most desirable Compute the net present value of each project, indicating the most desirable project and the least desirable project using this method. (Round computations and final answers to 0 decimal places, e.g. 125.) AA NPV CashFlow PV @ 12% Present Value 0 -$22,000 1 -$22,000 1 $7,000 0.8929 $6,250 2 $9,000 0.7972 $7,174.74 3 $15,000 0.7118 $10,676.7 NPV $2,101.45 Middle BB NPV CashFlow PV @ 12% Present Value 0 -$22,000 1 -$22,000 1 $9,500 0.8929 $8,482.14 2 $9,500 0.7972 $7,573.34 3 $9,500 0.7118 $6,761.91 NPV $817.4 Least Desirable CC NPV CashFlow PV @ 12% Present Value 0 -$22,000 1 -$22,000 1 $13,000 0.8929 $11,607.14 2 $10,000 0.7972 $7,971.94 3 $9,000 0.7118 $6,406.02 NPV $3,985.1 Most Desirable

Related Questions

Navigate

• Browse (All)
• Browse S
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.