Assume an interest rate of 9% per year, compounded annually. Alternative A 4,000 800 infinite Initial Cost Annual Benefit Useful Life (yrs) Alternative B 2,300 1,627 16 Alternative C 8,000 3,027 8 Alternatives B and C are replaced at the end of their useful lives with identical replacements. Using present worth analysis, find the best alternative. Choose Alternative C because its net present worth is $2,566.24 more than its nearest competitor Choose Alternative A because its net present worth is postive Choose Alternative A because it lasts the longest Choose Alterntive C because it has the highest annual benefit

Assume an interest rate of 9% per year, compounded annually. Alternative A 4,000 800 infinite Initial Cost Annual Benefit Useful Life (yrs) Alternative B 2,300 1,627 16 Alternative C 8,000 3,027 8 Alternatives B and C are replaced at the end of their useful lives with identical replacements. Using present worth analysis, find the best alternative. Choose Alternative C because its net present worth is $2,566.24 more than its nearest competitor Choose Alternative A because its net present worth is postive Choose Alternative A because it lasts the longest Choose Alterntive C because it has the highest annual benefit

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Consider the following future value. (Round your answers to the nearest cent.) $3,739 at 11 7/8% compounded monthly for 17 years and 7 months (a) Find the present value that will generate the given future value.$ ____________(b) Interpret the present value. One would have to invest $ ___________ now to have the future value in the given time.
You are comparing two annuities. Annuity A pays $115 at the end of each year for 5 years. Annuity B pays $105 at the beginning of each year for 5 years. The rate of return on both annuities is 12 percent. Which one of the following statements is correct given this information? Annuity B has both a higher present value and a higher future value than Annuity A. O Annuity A has both a higher present value and a higher future value than Annuity B. O Annuity A has the same present value and future value as Annuity B.
Suppose initially that two assets, A and B, will each make a single guaranteed payment of $400 in 1 year. But asset A has a current price of $280 while asset B has a current price of $320. Instructions: Round your answers to 2 decimal places. a. What are the rates of return of assets A and B at their current prices? Return on assetA =| |percent Return on asset B = percent Given these rates of return, which asset should investors buy and which asset should they sell? Buy asset (Click to solect) v and sell asset (Click to select) b. Assume that arbitrage continues until A and B have the same expected rate of return. When arbitrage ends, will A and B have the same price? (Click to select) Next, consider another pair of assets, C and D. Asset C will make a single payment of $600 in 1 year, while D will make a single payment of $800 in 1 year. Assume that the current price of C is $440 and that the current price of D is $680. c. What are the rates of return of assets C and D at their…
For each of the following situations involving single amounts, solve for the unknown. Assume that interest is compounded annually. ( interest rate, and n= number of years) (FV of $1, PV of $1, FVA of $1. PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided. Round your final answers to nearest whole dollar amount.) Present Value Future Value 1. 54,000 8.0% 2. 17,127 S 88.000 16 3. 10,117 43,500 20.0% 14. 42,558 S 135,000 15 5. 10,378 7.0% 6.
APPLY THE CONCEPTS: Present value of a single amount in the future (better overview of question in attachment) As it is important to know what a current investment will yield at a point in the future, it is equally important to understand what investment would be required today in order to yield a required future return. The following timeline displays what present investment is required in order to yield $8,000 three years from now, assuming annual compounding at 5%. Future Value: $8,000 Year 1 Year 2 Year 3 Present Value: ? The most straightforward method for calculating the present value of a future amount is to use the Present Value Table. By multiplying the future amount by the appropriate figure from the table, one may adequately determine the present value. + Present Value of a Future Amount Table1 - Present Value of $1 at Compound Interest Period 5% 6% 7% 8% 9% 10% 11% 12% 1 0.952 0.943 0.935 0.926 0.917 0.909…
2) Consider the following timeline where the firm requires the annuity to provide a minimum return of 20%.: Project A End of Year -100,000 15,000 20,000 ? 30,000 Calculate Present Value (PV) (Write any number for year 3)
Use present value tables to compute the present value of $450,000 to be paid in 10 years, with an interest rate of 10 percent. (Future Value of $1, Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1) (Use appropriate factor(s) from the tables provided. Round "Present Value" to nearest whole dollar amount.) Table Function: Future Value: Present Value: i= %
An investment will pay $150 at the end of each of the next 3 years, $300 at the end of Year 4, $600 at the end of Year 5, and incur a $500 cost at the end of Year 6. If other investments of equal risk earn 6.7% annually, what is this investment’s present value? Its future value?
Complete the following analysis of investment alternatives and select the preferred alternative. The study period is three years and the MARR = 15% per year. Alternative Alternative Alternative A B C Capital investment Annual revenues Annual costs Market value at EOY 3 PW (15%) Click the icon to view the interest and annuity table for discrete compounding when i=15% per year. OA. Alternative A OB. Alternative C OC. Alternative B OD. Do Nothing $11,000 3,900 240 4,900 578 The PW of the alternative B is $ (Round to the nearest dollar.) Select the preferred alternative. Choose the correct answer below. $15,000 6,500 450 6,100 ??? $13,100 5,500 400 2,800 385
Consider the following future value. (Round your answers to the nearest cent.)$4,472 at 10 3/4% compounded quarterly for 6 years (a) Find the present value that will generate the given future value. ____$ (b) Interpret the present value. One would have to invest ____$ now to have the future value in the given time.
Find the future value FV of the given present value. (Round your answer to the nearest cent.) Present value of $3,660 at 2 3/4% for eight years
Part B: Solve the following excersises: 1) Consider the following timeline where the firm requires the annuity to provide a minimum return of.....%. (write any number for interest rate): Project A End of Yoar -50,000 15,000 15,000 15,000 15,000 Calculate Future Value (FV) using two methods (Timeline and Equation) and compare the answers.