i: CengageNOW | Online teachi × 9 Internal Rate Of Return A Proje X sjc.cengagen
ID: 2781091 • Letter: I
Question
i: CengageNOW | Online teachi × 9 Internal Rate Of Return A Proje X sjc.cengagenow.com/ilrn/takeAssignment/takeAssignmentMain.do?takeAssignmentSessionLocatorassignment-take Net Present Value-Unequal Lives Project 1 requires an original investment of $56,500. The project will yield cash flows of $12,000 per year for five years. Project 2 has a calculated net present value of $13,800 over a three-year life. Project 1 could be sold at the end of three years for a price of $48,000 Use the Present Value of $1 at Compound Interest and the Present Value of an Annuity of 1 at Compound Interest tables shown below Present Value of $1 at Compound Interest 1096 0.909 0.826 12% 0.893 0.797 20% 0.833 0.694 0.579 0.482 0.402 0.335 0.279 0.627 0.467 0.404 0.3270.233 0.194 0.162 Year 6% 0.943 0.890 15% 0.870 0.756 0.840 0.751 0.712 0.658 0.792 0.683 0.636 0.572 0.747 0.621 0.567 0.497 0.705 0.564 0.507 0.432 0.376 0.665 0.513 0.452 0.592 0.4240.361 0.284 10 0.558 0.386 0.322 0.247 Present Value of an Annuity of $1 at Compound Interest 1096 0.909 1.736 12% 0.893 1.690 15% 0.870 1.626 Year 6% 0.943 1.833 20% 0.833 1.528 2.673 2.487 2.4022.283 2.106 3.465 3.170 3.037 2.8552.589 2.991 3.326 3.605 3.837 4.212 3.791 3.605 4.917 4.355 4.111 2 4.868 4.564 3.352 3.784 4.160 4.9684.487 5.58 6.210 5.335Explanation / Answer
Answer a.
Project 1:
Initial Investment = $56,500
Annual Cash flow = $12,000
Terminal Cash flow = $48,000
Period of Project = 5 years
Rate of return = 6%
Net Present Value = -$56,500 + $12,000 * PV of an annuity of $1 (6%, 5) + $48,000 * PV of $1 (6%, 5)
Net Present Value = -$56,500 + $12,000 * 4.212 + $48,000 * 0.747
Net Present Value = $29,900
Project 2:
Net Present Value = $13,800
Answer b.
Project 1 provides the greatest net present value.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.