Problem 10.05Your answer is partially correct. Try again.Sheridan Incorporated management is considering investing in two alternative production systems. The systems are mutually exclusive, and the cost of the new equipment and the resultingcash flows are shown in the accompanying table. The firm uses a 8 percent discount rate for production system projects.YearSystem 1System 2-$14,800-$46,900114,80034,900214,80034,90014,80034,900Calculate NPV. (Enter negative amounts using negative sign, e.g. -45.25. Do not round discount factors. Round answers to 2 decimal places, e.g. 15.25.)38082.3177802.20NPV of System 1 is $and NPV of System 2 is $

Net Present Value (NPV): NPV is a technique used in capital budgeting to see the project is…

Answered: Problem 10.05 Your answer is partially…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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10.5 Net present value: Blanda Incorporated management is considering investing in two alternative production systems. The systems are mutually exclusive, and the cost of the new equipment and the resulting cash flows are shown in the accompanying table. If the firm uses a 9 percent discount rate for production system projects, in which system should the firm invest? Year System 1 System 2 -$15,000 -$45,000 1 15,000 32,000 2 15,000 32,000 15,000 32,000 10.6 Payback: Refer to Problem 10.5. What are the payback periods for production systems 1 and 2? If the systems are mutually exclusive and the firm always chooses projects with the lowest payback period, in which system should the firm invest? 10.7 Payback: Quebec, Inc., is purchasing machinery at a cost of $3,768,966. The company's management expects the machinery to produce cash flows of $979,225, $1,158,886, and $1,881,497 over the next three years, respectively. What is the payback period? 10.8 Payback: Northern Specialties just…
Question 1: Salalalh Methanol company management is considering three competing investment Projects A, B & C Year Initial Investment Project A Project B 12000 4150 5260 Project C 12000 12000 1200 3100 5225 3 4 Assume a discount Rate of 5.45 % 3800 4600 7360 9460 8250 9275 9300 Use the information above and help the management in choosing the most desirable Project using Payback period
QUESTION 1 Agro Tech Corporation is considering investing in a new IT system for selling to its clients. The company has identified two new possible systems, which would be suitable for its customers. Only one of the systems can be selected and the directors are looking for guidance on which system would be the best. The company requires a 15% rate of return on projects of this nature. The installation cost per project will be R100 000 each, while systems can be disposed for R200 000 each after five- years life span. Cash flows for Agro Tech Corporation: IT System (Rands) PERIOD 1 2 3 4 5 SYSTEM A -4 000 000 R1 800 000 R1 700 000 R1 600 000 R1 500 000 R1 400 000 SYSTEM B -3 500 000 1 500 000 1 500 000 1 500 000 1 400 000 R1 300 000 Required: 1.1 Determine the payback period in years, months and days for both systems 1.2 Based on your calculations in 1.1, which system should Agro Tech Corporation consider? Why? 1.3 Calculate the Net Present Value for both systems. 1.4 Calculate the…
Problem: A company is considering two projects. The discount rate is 10 percent, and the projects’ cash flows would be: Years 0 1 2 3 Project A -$700 $500 $300 $100 Project B -$700 $100 $300 $600 Calculate the projects’ NPVs and IRRs. If the two projects are independent, which project(s) should be chosen? If the two projects are mutually exclusive, which project should be chosen?
B. Problem: A company is considering two projects. The discount rate is 10 percent, and the projects' cash flows would be: Years 1 3 Project A -S700 S500 $300 S100 Project B -S700 s100 S300 S600 a. Calculate the projects' NPVS and IRRS. b. If the two projects are independent, which project(s) should be chosen? c. If the two projects are mutually exchusive, which project should be chosen?
#3 HE Year Project A Project B 0 -$20,000 -$23,000 1 2 3 15,200 5,900 2,100 14,300 8.100 7,100 Suppose the company uses the NPV rule to rank these two projects. Which project should be chosen if the appropriate discount rate is 15 percent?
EconomicS 2. Referring to the given data in 6.7/317 at the end of Chapter 6 (Engineering Economy by Sullivan et al), select the best alternative using: (a) PW (b) AW © FW (d) IRR 6-7. Three mutually exclusive design alternatives are being considered. The estimated cash flows for each alternative are given next. The MARR is 20% per year. At the conclusion of the useful life, the investment will be sold. A в $28,000 $55,000 $40,000 Annual expenses $15,000 $13,000 $22,000 Annual revenues $23,000 $28,000 $32,000 $6,000 $8,000 $10,000 Investment cost Market value Useful life 10 years 10 years 10 years 26.4% 24.7% 22.4% IRR A decision-maker can select one of these alternatives or decide to select none of them. Make a recommendation using the PW method. (6.4)
Project A - 10,000 Project B - 10,000 4000 3000 10,000 5000 4000 3000 A. Project A B. Project B C. Neither project, - both have a NPV of 0. Project C - 10,000 3000 4000 5000 Time 0 Time 1 Time 2 Time 3 If WiseGuy Inc is choosing one of the above mutually exclusive projects (Project A or Project B), given a discount rate of 8%, which should the company choose? D. Both projects, - both have positive NPV. E. Neither project,- both have negative NPV. Project D - 10,000 4000 4000 4000 Project E - 10,000 2000 6000 10,000
Project A Time 0 - 10,000 Time 1 5,000 Time 2 Time 3 4,000 3,000 Project B - 10,000 4,000 3,000 10,000 If WiseGuy Inc. is choosing one of the above mutually exclusive projects (Project A or Project B), given a discount rate of 8%, which should the company choose? OA. Project A OB. Project B OC. Neither project-both have negative NPV. OD. Both projects-both have positive NPV.
Problem 10.24Blanda Incorporated management is considering investing in two alternative production systems. The systems are mutually exclusive, and the cost of the new equipment and the resulting cash flows are shown in the accompanying table. If the firm uses a 9 percent discount rate for their production systems,Year System 1 System 20 -$14,800 -$45,662 1 15,037 32,200 2 15,037 32,200 3 15,037 32,200 Compute the IRR for both production system 1 and production system 2. (Round answers to 2 decimal places, e.g. 15.25.)a). IRR of system 1 is __% and IRR of system 2 is ___% b).Which has the higher IRR, System 1 or System 2? c). Compute the NPV for both production system 1 and production system 2. (Round answers to 2 decimal places, e.g. 15.25 or 15.25%.)NPV of system 1 is $ ____ and NPV of system 2 is ____d). Which production system has the higher NPV? System 1 or System 2?
[EXCEL] Net present value: Blanda Incorporated management is considering investing in two alternative production systems. The systems are mutually exclusive, and the cost of the new equipment and the resulting cash flows are shown in the accompanying table. If the firm uses a 9 percent discount rate for production system projects, in which system should the firm invest? Please use excel. Year System 1 System 2 0 −$15,000 −$45,000 1 15,000 32,000 2 15,000 32,000 3 15,000 32,000
Value/other investment criteria (i Saved Help Save Consider the following two projects: Cash flows Project A Project B -$270 CO -$270 С1 115 143 C2 115 143 Сз 115 143 C4 115 a. If the opportunity cost of capital is 10%, which of these two projects would you accept (A, B, or both)? b. Suppose that you can choose only one of these two projects. Which would you choose? The discount rate is still 10%. Which one would you choose if the cost of capital is 15%? d. What is the payback period of each project? e. Is the project with the shortest payback period also the one with the highest NPV? f. What are the internal rates of return on the two projects? g. Does the IRR rule in this case give the same answer as NPV? h-1. If the opportunity cost of capital is 10%, what is the profitability index for each project? h-2. Is the project with the highest profitability index also the one with the highest NPV? h-3. Which measure should you use to choose between the projects? Complete this question by…

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