IBM networks want to modernize their networking system. Proposals have been received from two major software companies. The first proposal cost $6million but will raise the firm’s annual cash flows by $3million. The second proposal cost $7million and provides cash flow of $3.5million a year. Both projects have a life span of 3 years. Assuming that the cost of capital is 8%, which proposal may be recommended on the basis of Net Present Value criteria. Select one: a. Project B, NPV 1731290 b. Project A, NPV 20198 c. Project B, NPV 2019839 d. Project A, NPV 2019839
IBM networks want to modernize their networking system. Proposals have been received from two major software companies. The first proposal cost $6million but will raise the firm’s annual cash flows by $3million. The second proposal cost $7million and provides cash flow of $3.5million a year. Both projects have a life span of 3 years. Assuming that the cost of capital is 8%, which proposal may be recommended on the basis of Net Present Value criteria. Select one: a. Project B, NPV 1731290 b. Project A, NPV 20198 c. Project B, NPV 2019839 d. Project A, NPV 2019839
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter19: Capital Investment
Section: Chapter Questions
Problem 15E: Gina Ripley, president of Dearing Company, is considering the purchase of a computer-aided...
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QA) choose the correct answer:
1. IBM networks want to modernize their networking system. Proposals have been received from two major software companies. The first proposal cost $6million but will raise the firm’s annual cash flows by $3million. The second proposal cost $7million and provides cash flow of $3.5million a year. Both projects have a life span of 3 years. Assuming that the cost of capital is 8%, which proposal may be recommended on the basis of
Select one:
a. Project B, NPV 1731290
b. Project A, NPV 20198
c. Project B, NPV 2019839
d. Project A, NPV 2019839
2. Mohammed is 65 years of age and has a life expectancy of 12 more years. He wishes to invest $40,000 in an annuity that will make a level payment at the end of each year until his death. If the interest rate is 10%, what income can Mr. Mohammed expect to receive each year?
(Choose the correct answer from below options and attach all your explanations in the other link provided)
Select one:
a. 272
b. 272560
c. 27256
d. 2725
3. Smithklime produces dividends in three consecutive years of 0.19, 0.41, and 0.75, respectively. The dividend in year four is estimated to be 0.86 and should grow in perpetuity at 6%. Given a discount rate of 8%, what is the price of the stock?
Select one:
a. 35
b. 3500
c. 350
d. 75
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