Find out which investment plan will yield loss, which investment plan will yield profit, and which investment plan equates market rate of interest and discount rate of interest. Supply Price of a capital is 100,000 Rs. Market rate of interest is 0.07. i. Plan A yields 102,000 Rs ii. Plan B yields 107,000 Rs. iii. Plan C yields 111,000 Rs

Find out which investment plan will yield loss, which investment plan will yield profit, and which investment plan equates market rate of interest and discount rate of interest. Supply Price of a capital is 100,000 Rs. Market rate of interest is 0.07. i. Plan A yields 102,000 Rs ii. Plan B yields 107,000 Rs. iii. Plan C yields 111,000 Rs

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter12: Capital Investment Decisions

Section: Chapter Questions

Problem 52P

See similar textbooks

Similar questions

Assume that an investment of 100,000 produces a net cash flow of 60,000 per year for two years. The discount factor for year 1 is 0.89 and for year 2 is 0.80. The NPV is a. 0 b. 6,800 c. 1,400 d. (4,000)
Buena Vision Clinic is considering an investment that requires an outlay of 600,000 and promises a net cash inflow one year from now of 810,000. Assume the cost of capital is 10 percent. Required: 1. Break the 810,000 future cash inflow into three components: a. The return of the original investment b. The cost of capital c. The profit earned on the investment 2. Now, compute the present value of the profit earned on the investment. 3. Compute the NPV of the investment. Compare this with the present value of the profit computed in Requirement 2. What does this tell you about the meaning of NPV?
Your company is planning to purchase a new log splitter for is lawn and garden business. The new splitter has an initial investment of $180,000. It is expected to generate $25,000 of annual cash flows, provide incremental cash revenues of $150,000, and incur incremental cash expenses of $100,000 annually. What is the payback period and accounting rate of return (ARR)?
Assume a company is going to make an investment in a machine of $825,000 and the following are the cash flows that two different products would bring. Which of the two options would you choose based on the payback method?
Investments Quick and Slow cost $1,000 each, are mutually exclusive, and have the following cash flows. The firm’s cost of capital is 10 percent (refer to image): a.) According to the net present value method of capital budgeting, whichinvestment(s) should the firm make? b.) According to the internal rate of return method of capital budgeting, which investment(s) should the firm make? c.) If Q is chosen, the $1,300 can be reinvested and earn 12 percent. Doesthis information alter your conclusions concerning investing in Q and S? To answer, assume that S’s cash flows can be reinvested at its internal rate of return. Would your answer be different if S’s cash flows were reinvested at the cost of capital (10 percent)?
Find the profitability index for Oman Air conditioner Company if the initial investment is 4000 OMR and the cash Inflows are as follows: Year 1 =1350 OMR; Year 2 =1400 OMR; Year 3=1450 OMR and Year 4=1500 OMR. Use discount rate as 5%. Select one: a. None b. 1.69 c. 1.83 d. 1.26 e. 1.48
Compare these two investments A: A USD 1,000,000 investment that earns USD 50,000 in interest. B: A USD 200,000 investment that earns USD 15,000 in interest. • Which one generates more investment? • Which one earns a higher return on investment? • Which is the best investment option?
please colud you explain me what how you using calculator or computation to determine NPV or IRR. A firm has the following investment alternatives: Year A B C 1 $400 $--- $-- 2 400 400 --- 3 400 800 --- 4 400 800 1,800 Each investment costs $1,400, and the firm's cost of capital is 10 percent. a. What is each investment's internal rate of return? b. Should the firm make any of these investment? c. What is each investment's net present value? d. Should the firm firm make any of these investments?
A firm has two possible investment with the following cash inflows. Each investment cost $480, and the cost of capital is ten percent. Cash Inflows Year A B 1 $300 $200 2 200 200 3 100 200 a. Based only on visual inspection, which investment is to be preferred and why? b. Based on each investment’s net present value, which investment(s) should the firm make? c. Based on each investment’s internal rate of return, which investment(s) should the firm make? Is this the same answer you obtained in part b? d. If the cost of capital were to increase to 14 percent, which investment(s) should the firm make?
Jiminez Company has two investment opportunities. Both investments cost $5,000 and will provide the following net cash flows: Year Investment A investemen B 1 3,000 3,000 2 3,000 4,000 3 3,000 2,000 4 3,000 1,000 What is the total present value of Investment A's cash flows assuming an 8% minimum rate of return? (Do not round your intermediate calculations. Round your answer to the nearest whole dollar.) A) $14,936. B) $4,936.…
A firm has the following investment alternatives (refer to image): Each investment costs $3,000; investments B and C are mutually exclusive, and the firm’s cost of capital is 8 percent. a.) What is the net present value of each investment? b.) According to the net present values, which investment(s) should the firm make? Why? c.) What is the internal rate of return on each investment?
Find the profitability index for Oman Clothing Company if the initial investment is 700 OMR and the cash Inflows are as follows: Year 1 =350 OMR; Year 2 =400 OMR; Year 3=450 OMR and Year 4=500 OMR. Use discount rate as 10%. Select one: a. 1.15 b. 1.41 c. None of the options d. 1.89 e. 2.89