A1 Vaughn Company has the following information about a potential capital investment:Initial investmentAnnual cash inflowExpected lifeCost of capitalRequired:$ 380,000$ 89,0006 years9%1. Calculate the net present value of this project. (Future Value of $1, Present Value of $1, Future Value Annuity of $1, Present ValueAnnuity of $1.)Note: Use appropriate factor(s) from the tables provided. Round the final answer to nearest whole dollar.Net Present Value

To calculate the net present value:Step 1: Identify the givenStep 2: Identify the discount factor…

Answered: Vaughn Company has the following…

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 8TP: Fenton, Inc., has established a new strategic plan that calls for new capital investment. The...

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Fenton, Inc., has established a new strategic plan that calls for new capital investment. The company has a 9.8% required rate of return and an 8.3% cost of capital. Fenton currently has a return of 10% on its other investments. The proposed new investments have equal annual cash inflows expected. Management used a screening procedure of calculating a payback period for potential investments and annual cash flows, and the IRR for the 7 possible investments are displayed in image. Each investment has a 6-year expected useful life and no salvage value. A. Identify which project(s) is/are unacceptable and briefly state the conceptual justification as to why each of your choices is unacceptable. B. Assume Fenton has $330,000 available to spend. Which remaining projects should Fenton invest in and in what order? C. If Fenton was not limited to a spending amount, should they invest in all of the projects given the company is evaluated using return on investment?
Vaughn Company has the following information about a potential capital investment: Initial investment $ 280,000 Annual cash inflow $ 74,000 6 years 13% Expected life: Cost of capital 1. Calculate the net present value of this project. (Future Value of $1. Present Value of $1. Euture Value Annuity of $1. Present Value Annuity of $1.) (Use appropriate factor(s) from the tables provided. Round the final answer to nearest whole dollar.) Net Present Value
Assume that Project A has the cash flows listed below and a relevant cost of capital of 13 percent. Based on this data, determine the net present value (NPV) of this project using the equivalent annual annuity (EAA) approach and assuming infinite replication. Year 0 1 2 3 4 5 $2.905.70 O $4.967.16 $2.063.33 $3.865.27 $6,244.42 Project A Cash Flow - $8.000.00 $ $ $ 0.00 0.00 0.00 0.00 $20,000.00
Fransico Ltd. is trying to determine which of three projects it wants to invest in. All three projects have been analyzed into Net Present Value amounts. (Round your answers to two decimal places when needed and use rounded answers for all future calculations). 1. Calculate the Net Present Value based on the following information: Cash Flows Project 2 Project 6 Project 12 Present Value of net cash inflows $491,900 $778,300 $503,700 Initial InvestmentSingle line $146,000Single line $407,400Single line $206,400Single line Single lineNet Present ValueDouble line Single lineDouble line Single lineDouble line Single lineDouble line 2. Calculate the Profitability Index for each of the projects. Round to two decimal places. Project Present value of net cash inflows / Initial Investment = Profitability Index 2 / = 6 / = 12 / = 3. Based on the Profitability Index, which project should be selected?
A project has the following cash flows set out below. What is the profitability index of this project if the relevant discount rate is 2 percent? Enter your final answer to two decimal places. Year Cash flow 0 -1,745 1 537 2 2,066 3 3,912
The following are the cash flows of two projects: Project B Year Project A $ (300) 0 $ (300) 1 180 200 2 180 200 3 180 200 4 180 If the opportunity cost of capital is 12%, what is the profitability index for each project? Note: Do not round intermediate calculations. Round your answers to 4 decimal places. Project A B Profitability Index
Questions: Crowell Company is considering two capital investments. Both investments have an initial cost of $9,000,000 and total net cash inflows of $17,000,000 over 10 years. Crowell requires a 15% rate of return on this type of investment. Expected net cash inflows are as follows: Requirements - X 1. Use Excel to compute the NPV and IRR of the two plans. Which plan, if any, should the company pursue? 2. Explain the relationship between NPV and IRR. Based on this relationship and the company's required rate of return, are your answers as expected in Requirement 1? Why or why not? 3. After further negotiating, the company can now invest with an initial cost of $8,100,000. Recalculate the NPV and IRR. Which plan, if any, should the company pursue? Print Done Data Table Year Plan Alpha Plan Beta 1 1,700,000 $ 1,700,000 2 1,700,000 2,400,000 1,700,000 3,100,000 4 1,700,000 2,400,000 1,700,000 1,700,000 6 1,700,000 1,600,000 1,700,000 1,300,000 8 1,700,000 1,000,000 9 1,700,000 700,000…
Financial Manager of Timmy Company is considering two projects (project A and project H), which have cash flows as follows: Year Cash Flow of Project A (in $) Cash Flow of Project H (in $) 0 -100 -100 1 10 70 2 60 50 3 80 20 Timmy Company’s cost of capital is 10 percent. Calculate payback, NPV, IRR, and MIRR for both projects. (Please have a step by step format to your answer with explainations. Thanks (=)
Below are information relating to three (3) possible projects. Evaluate the projects by filling up the blanks provided for the final answers. Show computations in the yellow pad. Net Cash outlay Annual net cash inflows Annual depreciation expense Expected recovery period Cost of capital Discounted payback period Internal rate of return (approximate) Net Present Value (NPV) Simple Accounting Rate of Return Ranking May P300,000 50,000 20,000 10 years 16% June P120,000 35,000 18,000 6 years 18% Dianay P150,000 55,000 25,000 5 years 22%
You are given the following cash flows for a project. Assuming a cost of capital of 12.84 percent. determine the profitability index for this project. Year 0 1 2 3 4 5 O 14981 O 1.68/7 O1.7508 1.6245 1.5613 Cash Flow -$1,115.00 $554.00 $622.00 $648 00 $426.00 $216.00
Information on four investment proposals is given below. Investment required Present value of cash inflows Net present value. Life of the project Investment Profitability Index Proposal A B C D $ (280,000) 393,900 $ 113,900 Rank Preference 5 years Investment Proposal B 5 (140,000) 192,800 $ 52,800 Required: 1. Compute the profitability index for each investment proposal (Round your answers to 2 decimal places.) 2. Rank the proposals in terms of preference 7 years $ (50,000) 78,100 $ 28,100 6 years D $ (780,000) 1,038,100 $ 258,100 6 years
You are analyzing two proposed capital investments with the following cash flows: Year Project X Project Y - $20,000 - $20,000 12,630 7,470 5,660 7,470 3 6,360 7,470 4 1,920 7,470 1, 2.

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