A company is considering two alternative investment opportunities, each of which requires an initial cash outlay of $110,000. The expected net cash flows from the two projects follow: Project A Project Z Year 1 ……………… $ 30,000$ 44,000Year 2 ………………44,000 70,000Year 3……………… 70,000 30,000Totals ……………… $144,000$144,000 Based on a comparison of their net present values, and assuming the same discount rate of 12% is required for both projects, which project is the better investment? Use the table values below to compute the net present value of each project's cash flows.Periods Present value of 1 at 12%1……………….0.89292……………….0.79723……………….0.7118
What will be an ideal response?
Project A
| 0.8929 * $30,000 = | $ 26,787 |
| 0.7972 * 44,000 = | 35,077 |
| 0.7118 * 70,000 = | 49,826 |
| Total …………………………… | $111,690 |
| Initial cost ……………………... | (110,000) |
| Net present value ……………… | $ 1,690 |
| 0.8929 * $44,000 = | $ 39,288 |
| 0.7972 * 70,000 = | 55,804 |
| 0.7118 * 30,000 = | 21,354 |
| Total …………………………… | $116,446 |
| Initial cost ……………………... | (110,000) |
| Net present value ……………… | $ 6,446 |
Select Project Z. Its NPV is higher due to higher cash flows in the first and second year.
You might also like to view...
__________, or an increase in the level of prices, is another important consideration in analyzing financial statements
Fill in the blank(s) with correct word
Protection Transparency, Inc is being audited by Messer and Bromely, LLP. During the assessment of fraud, Messer and Bromely discover that the controller has been creating fictional sales and posting them to the general ledger. Who should the auditors make aware of this issue?
a. Protection Transparency's legal counsel. b. The police. c. The chairman of Protection Transparency's audit committee. d. The predecessor auditor of Protection Transparency.
The fundamental premises that individuals hold about themselves and their functioning in the world are known as ______.
A. psychological capital B. self-efficacy C. high Mach D. core self-evaluations
Multichannel marketing is the blending of different ________ that are mutually reinforcing in attracting, retaining, and building relationships with consumers who shop and buy in traditional intermediaries and online.
A. communication channels B. pricing channels C. communication and delivery channels D. distribution channels E. direct and indirect channels