Using the internal rate of return method calculate an approximate interest yield
ID: 2489353 • Letter: U
Question
Using the internal rate of return method calculate an approximate interest yield for the project. (use table from Appendix D) Should this project be accepted by Hewlett-Packard and why? The Hershey company is planning their capital expenditure budget and has to decide which of the following two projects to invest in. Each project will last for three years and produce the following annual net income. The equipment will have no salvage value at the end of its three-year life. Hershey company uses straight-line depreciation. Hershey requires a minimum rate of return of 10%. Assuming that each project requires an initial investment of $70, 000, compute the net present value of each project. (use tables from Appendix D) which project should Hershey select? Why?Explanation / Answer
Net present value ( thunder)
Year amount factor PV
0 -70,000 1.000 -70,000
1 6,000 .90909 5,455
2 9,000 .82645 7,438
3 14,000 .75131 10,518
Net present value -46,589
Year amount factor PV
0 -70,000 1.000 -70,000
1 9,000 .90909 8,182
2 9,000 .82645 7,438
3 9,000 .75131 6,762
Net present value -47,618
Will prefer thunder project
Net present value ( thunder)
Year amount factor PV
0 -70,000 1.000 -70,000
1 6,000 .90909 5,455
2 9,000 .82645 7,438
3 14,000 .75131 10,518
Net present value -46,589
Year amount factor PV
0 -70,000 1.000 -70,000
1 9,000 .90909 8,182
2 9,000 .82645 7,438
3 9,000 .75131 6,762
Net present value -47,618
Will prefer thunder project
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