Carla Vista Company is considering three long-term capital investment proposals. Each investment has a useful life of 5 years. Relevant data on each project are as follows. Project Bono Project Edge Project Clayton Capital investment $165,000 $183.000 $212.000 Annual net income: Year 1 15,400 19,800 29,700 2 15,400 18,700 25,300 3 15,400 17.600 23.100 4 15.400 13,200 14,300 5 15.400 9.900 13.200 Total $77,000 $79,200 $105,600 Depreciation is computed by the straight-line method with no salvage value. The company's cost of capital is 15%. (Assume that cash flows occur evenly throughout the year.) Click here to view PV table. in

Carla Vista Company is considering three long-term capital investment proposals. Each investment has a useful life of 5 years. Relevant data on each project are as follows. Project Bono Project Edge Project Clayton Capital investment $165,000 $183.000 $212.000 Annual net income: Year 1 15,400 19,800 29,700 2 15,400 18,700 25,300 3 15,400 17.600 23.100 4 15.400 13,200 14,300 5 15.400 9.900 13.200 Total $77,000 $79,200 $105,600 Depreciation is computed by the straight-line method with no salvage value. The company's cost of capital is 15%. (Assume that cash flows occur evenly throughout the year.) Click here to view PV table. in

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 11P

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Project S has a cost of $10,000 and is expected to produce benefits (cash flows) of $3,000 per year for 5 years. Project L costs $25,000 and is expected to produce cash flows of $7,400 per year for 5 years. Calculate the two projects’ NPVs, IRRs, MIRRs, and PIs, assuming a cost of capital of 12%. Which project would be selected, assuming they are mutually exclusive, using each ranking method? Which should actually be selected?
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?
U3 Company is considering three long-term capital investment proposals. Each investment has a useful life of 5 years. Relevant data on each project are as follows. Project Bono Project Edge Project Clayton Capital investment $164,800 $180,250 $204,000 Annual net income: Year 1 14,420 18,540 27,810 14,420 17.510 23,690 3 14,420 16,480 21,630 14.420 12.360 13,390 5 14,420 9,270 12,360 Total $72,100 $74,160 $98,880 Depreciation is computed by the straight-line method with no salvage value. The company's cost of capital is 15%. (Assume that cash flows occur evenly throughout the year.) Click here to view the factor table. Compute the cash payback period for each project. (Round answers to 2 decimal places, e.g. 10.50.) Project Bono years Project Edge years Project Clayton years eTextbook and Media Compute the net present value for each project. (Round answers to 0 decimal places, e.g. 125. If the net present value is negative, use either a negative sign preceding the number eg -45 or…
U3 Company is considering three long-term capital investment proposals. Each investment has a useful life of 5 years. Relevant data on each project are as follows. Project Bono Project Edge Project Clayton Capital investment $164,800 $180,250 $204,000 Annual net income: Year 1 14,420 18,540 27,810 2 14,420 17,510 23,690 3 14,420 16,480 21,630 4 14,420 12,360 13,390 5 14,420 9,270 12,360 Total $72,100 $74,160 $98,880 Depreciation is computed by the straight-line method with no salvage value. The company’s cost of capital is 15%. (Assume that cash flows occur evenly throughout the year.) Compute the cash payback period for each project. (Round answers to 2 decimal places, e.g. 10.50.) Project Bono enter the cash payback period in years rounded to 2 decimal places years Project Edge enter the cash payback period in years rounded to 2…
U3 Company is considering three long-term capital investment proposals. Each investment has a useful life of 5 years. Relevant data on each project are as follows. Project Bono Project Edge Project Clayton Capital investment $176,000 $192,500 $212,000 Annual net income: Year 1 15,400 19,800 29,700 15,400 18,700 25,300 15,400 17,600 23,100 4 15,400 13,200 14,300 15,400 9,900 13,200 Total $77,000 $79,200 $105,600 Depreciation is computed by the straight-line method with no salvage value. The company's cost of capital is 15%. (Assume that cash flows occur evenly throughout the year.) Click here to view PV table. (a) Compute the cash payback period for each project. (Round answers to 2 decimal places, e.g. 10.50.) years Project Bono years Project Edge years Project Clayton
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Sheridan Company is considering three long-term capital investment proposals. Each investment has a useful life of 5 years. Relevant data on each project are as follows. Project Bono Project Edge Project Clayton Capital investment $172,000 $190,000 $214,000 Annual net income: Year 1 15,120 19,440 29,160 2 15,120 18,360 24,840 3 15,120 17,280 22,680 4 15,120 12,960 14,040 5 15,120 9,720 12,960 Total $75,600 $77,760 $103,680 Depreciation is computed by the straight-line method with no salvage value. The company's cost of capital is 15%. (Assume that cash flows occur evenly throughout the year.) Click here to view the factor table. (a) × Your answer is incorrect. Compute the cash payback period for each project. (Round answers to 2 decimal places, e.g. 10.50.) Project Bono 11.38 years Project Edge 9.77 years Project Clayton 7.34 years
Sunland Company is considering three long-term capital investment proposals. Each investment has a useful life of 5 years. Relevant data on each project are as follows. Project Bono Project Edge Project Clayton Capital investment $166,000 $180,000 $208,000 Annual net income: Year 1 14,420 18,540 27,810 2 14,420 17,510 23,690 3 14,420 16,480 21,630 4 14,420 12,360 13,390 5 14,420 9,270 12,360 Total $72,100 $74,160 $98,880 Depreciation is computed by the straight-line method with no salvage value. The company's cost of capital is 15%. (Assume that cash flows occur evenly throughout the year.) Click here to view PV table.
U3 Company Is considering three long-term capital investment proposals. Each Investment has a useful llfe of 5 years. Relevant data on each project are as follows. Project Bono Project Edge Project Clayton Capital investment $169,600 $185,500 $214,000 Annual net income: Year 1 14,840 19,080 28,620 2 14,840 18,020 24,380 3 14,840 16,960 22,260 4 14,840 12,720 13,780 5 14,840 9,540 12,720 Total $74,200 $76,320 $101,760 Depreciation is computed by the straight-line method with no salvage value. The company's cost of capital is 15%. (Assume that cash flows occur evenly throughout the year.) [Use the factor table.] 1) Compute the cash payback period for each project. (Round to two decimals.) 2) Compute the net present value for each project. (Round to nearest dollar.) 3) Compute the annual rate of return for each project. (Round to nearest dollar.)
Crane Company is considering three long-term capital investment proposals. Each investment has a useful life of 5 years. Relevant data on each project are as follows. Project Bono Project Edge Project Clayton Capital investment $163,000 $175,000 $204,000 Annual net income: Year 1 14,420 18,540 27,810 2 14,420 17,510 23,690 3 14,420 16,480 21,630 4 14.420 12,360 13,390 5 14,420 9,270 12,360 Total $72,100 $74,160 $98,880 Depreciation is computed by the straight-line method with no salvage value. The company's cost of capital is 15%. (Assume that cash flows occur evenly throughout the year.) Click here to view PV table.
U3 Company is considering three long-term capital investment proposals. Each investment has a useful life of 5 years. Relevant data on each project are as follows. Capital investment Annual net income: Year 1 2 3 4 Total Project Bono $163,200 14,280 14,280 14,280 14,280 14,280 $71,400 Project Edge Project Clayton $178,500 $204,000 18,360 17,340 16,320 12,240 9,180 $73,440 27,540 23,460 21,420 13,260 12,240 $97,920 Depreciation is computed by the straight-line method with no salvage value. The company's cost of capital is 15%. (Assume that cash Flows occur evenly throughout the year.)
Blossom Company is considering three long-term capital investment proposals. Each investment has a useful life of 5 years. Relevant data on each project are as follows. Capital investment Annual net income: Total Year 1 2 32 S Project Bono $170,000 14,700 14,700 14,700 14,700 14,700 $73,500 Project Edge Project Clayton $185,000 $202,000 18,900 17,850 16,800 12,600 9,450 $75,600 28,350 24,150 22,050 13,650 12,600 $100,800 Depreciation is computed by the straight-line method with no salvage value. The company's cost of capital is 15%. (Assume that cash flows occur evenly throughout the year.) Click here to view the factor table.