Courtney Limited has capital project opportunities each of which would require an initial investment of $400,000. Details for each opportunity are shown below: Investment in manufacturing equipment Investment in working capital Net annual cash inflows Life of the project CCA Investment 1 $400,000 Investment 1 Investment 2 $100,000 Answer is complete but not entirely correct. Net present value $ 103,186 X $ 136,276 12 Years 30% Investment 2 The robotic equipment would have a salvage value of $75,000 in 12 years. The equipment would be depreciated over 12 years. At the end of 12 years, the investment in working capital would be released for use elsewhere. The company requires an after-tax return of 12% on all investments. The tax rate is 30%. Required: Compute the net present value of each investment project. (Hint. Use Microsoft Excel to calculate the discount factor(s).) (Do not round intermediate calculations and PV factor. Round the final answers to the nearest whole dollar.) $400,000 $100,000 12 Years
Courtney Limited has capital project opportunities each of which would require an initial investment of $400,000. Details for each opportunity are shown below: Investment in manufacturing equipment Investment in working capital Net annual cash inflows Life of the project CCA Investment 1 $400,000 Investment 1 Investment 2 $100,000 Answer is complete but not entirely correct. Net present value $ 103,186 X $ 136,276 12 Years 30% Investment 2 The robotic equipment would have a salvage value of $75,000 in 12 years. The equipment would be depreciated over 12 years. At the end of 12 years, the investment in working capital would be released for use elsewhere. The company requires an after-tax return of 12% on all investments. The tax rate is 30%. Required: Compute the net present value of each investment project. (Hint. Use Microsoft Excel to calculate the discount factor(s).) (Do not round intermediate calculations and PV factor. Round the final answers to the nearest whole dollar.) $400,000 $100,000 12 Years
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter12: Capital Investment Analysis
Section: Chapter Questions
Problem 2PA
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