The investment committee of Granny’s Restaurants Inc. is evaluating two restaurant sites. The sites have different useful lives, but each requires an investment of $1,200,000. The estimated net cash flows from each site are as follows:

Net Cash Flows 

Year 
Helena 
Butte 
1 
$375,000 
$500,000 
2 
$375,000 
$500,000 
3 
$375,000 
$500,000 
4 
$375,000 
$500,000 
5 
$375,000 

6 
$375,000 

The committee has selected a rate of 20% for purposes of net present value analysis. It also estimates that the residual value at the end of each restaurant’s useful life is $0, but at the end of the fourth year, Helena’s residual value would be $500,000.
Instructions: Using formulas/functions wherever available, complete the following on the Input tab…

For each site, compute the net present value, using the Present Value of an Annuity table. Ignore the unequal lives of the projects.

For each site, compute the net present value, assuming that Helena is adjusted to a fouryear life for purposes of analysis. For this use the Present Value of $1 table.

Having completed the analysis above, provide a brief recap of what you found in your analysis. Include in the recap, did the results show each project to be positive? Negative? And if Granny's can only do one project, which one should be done and why?
Want to see the full answer?
Check out a sample Q&A hereRelated Finance Q&A
Find answers to questions asked by students like you.
Q: he required investment cost of a new, large shopping center is $52 million. The salvage value of the…
A: Given, Investment=$52million Salvage value=$18million Project life=18 years Annual operating…
Q: Halls Construction is analyzing its capital expenditure proposals for the purchase of equipment in…
A: Capital budgeting decisions are the decisions that are taken by a corporation in relation to a…
Q: Halls Construction is analyzing its capital expenditure proposals for the purchase of equipment in…
A: Halls Company would compute the payback period for projects A, B, and C. The project(s) having the…
Q: Determine the FW of the following engineering project when the MARR is 13% per year. Is the project…
A: Given:
Q: Please answer the following questions in detail, provide examples whenever applicable, provide…
A: “Since you have posted a question with multiple subparts, we will solve first three subparts for…
Q: Determine the FW of the following engineering project when the MARR is 14% per year. Is the project…
A: Click to see the answer
Q: Determine the FW of the following engineering project when the MARR is 16% per year. Is the project…
A: Future Worth = P ( F/P, i, n) + A (F/A, i, n) + F
Q: Determine the FW of the foliowing engineering project when the MARR is 18% por year. Is the project…
A: From the given information, Annual net benefit ($) = Receipt  Expense = 7,500  3,000 = 4,500 FW…
Q: Suppose that a fim with a 12% required rate of retum is faced with the problem of replacing an…
A: Equivalent Annual Annuity (EAA) is a method of evaluating projects with different life durations.
Q: Use the information provided below to calculate the following. Note: Where applicable, use the…
A: Net present value is the difference between the present value of cash inflows and present value of…
Q: Use the information provided below to calculate the following. Note: Where applicable, use the…
A: Net present value is the difference between the present value of cash inflow and cash outflows.
Q: Suppose that a machine costing $9000.00 is to be replaced at the end of 7 years, at which time it…
A: Amount needed in fund at the end of 8 years = replacement cost  salvage value = 9000900 = 8100 Now…
Q: Determine the FW of the following engineering project when the MARR is 16% per year. Is the project…
A: The future worth analysis is a kind of quantitative analysis that helps in evaluating the capital…
Q: Prairie Corporation has provided the following information for a proposed investment project:…
A: NPV (Net present value) is the difference arises between the present values of cash inflow and cash…
Q: Calculate the payback period for each of the following mutually exclusive projects, then comment on…
A: Click to see the answer
Q: Use the NPV method to determine whether Vargas Products should invest in the following projects: •…
A: Maximum acceptable price to pay for each Project = Price payable where NPV @ Required annual return…
Q: Use Annual Worth method to calculate the benefit/cost ratio at i = 6% for a new library. The first…
A: Annual worth: It is the annual value of those cash flows that are expected to happen in the future.
Q: If Saina purchases and installs the new information system, what is the expected incremental…
A: Net realizable cost is the result when selling expenses are deducted from the estimated sales value.…
Q: What are the benefits and limitations of using the payback method to choose between projects?…
A: 1. Benefits of Payback method of Capital Budgeting This method ensures that all cash inflows are…
Q: If a garden center is considering the purchase of a new tractor with an initial investment cost of…
A: A payback period seems to be the amount of time a company anticipates it will take to recoup its…
Q: Use the NPV method to determine whether Juda Products should invest in the following projects:…
A: Project A, PV of cash inflows=Cash inflows×PV factor=$59,000×4.564=$269,276
Q: Based on the information above, identify which project (Project A or B) should be accepted? Explain…
A: Net Present Value: It is the present worth of the annual cash flows including the initial cost of…
Q: Consider the following:purchase of an office building worth P1M from unrestricted funding.…
A: If the company choose to take the asset out on lease, then the company has to make a payment towards…
Q: A contractor purchased equipment for $20,000 which provided future income of $45,000 after 11 years.…
A: Initial Investment is $20,000 Future Income is $45,000 Time Period is 11 Years. To Find: Rate of…
Q: Your supervisor has tasked you with evaluating several loans related to a new expansion project.…
A: Solution: Annual payment on Loan = $450,000 / Cumulative PV factor at 8% for 5 periods = $450,000 /…
Q: Mansour, a farmer in BaniSweif, is considering the purchase of a new soil cultivating machine,…
A: The question is based on the concept of Business Transaction Analysis.
Q: Seema is looking at an investment in upgrading an inspection line at her plant. The initial cost…
A: Capital Recovery: Using the capital recovery factor, you can figure out how much money you have in…
Q: Your company has been presented with an opportunity to invest in a project. The facts on the project…
A: Required Return = 15% Investment required = 50,000,000 N = 10 Gross Income per year = 18,000,000…
Q: Down below is the Chart where the New and Old Backhoes are displayed. Follow these Instructions:…
A: “Since you have posted a question with multiple subparts, we will solve the first three subparts…
Q: Sunshine will be using an equipment for her project. She wants to determine which equipment is…
A: given information initial cost for equipment A = 50,000 salvage value = 2,000 annual maintenance…
Q: Compare the following two alternatives by the IRR method, given MARR of 6%/year. First find if they…
A: The internal rate of return (IRR) is a discounted cash flow method for calculating the rate of…
Q: A contractor purchased equipment for $19,800 which provided future income of $52,000 after 6 years.…
A: Initial Investment is $19,800 Future Income is $52,000 Time Period is 6 Years. To Find: Rate of…
Q: (b) Suppose that a machine costing $9000.00 is to be replaced at the end of 7 years, at which time…
A: A machine costing $9,000 is to be replaced at the end of 7 years and its salvage value at this time…
Q: A flood control project with a life of 14 years will require an investment of $57.000 and annual…
A: Benefit to cost ratio: It is ratio of present value of the benefits to present value of costs.
Q: The Mansford Co. Evaluates projects using payback. Suppose that a project requiring an outlay of…
A: Payback Period = Years before full recovery + (unrecovered cost at the start of the year/ cashflow…
Q: Davis Inc. is considering purchasing equipment costing $60,000 with a 6year useful life. The…
A: Net Present Value = Present value of cash inflows – Initial investment
Q: a. Determine the expected internal rate of return of this project for seven years, using the present…
A: Present Value: The value of today’s amount to be paid or received in the future at a compound…
Q: An IT company receives two new project proposals. Project A will cost $250,000 to develop and is…
A: Given:
Q: Using the time value of money and a 5year life for this project, what is the present value of all…
A: Time value of Money It is a financial concept .The money that hold in the present is worth more…
Q: Consider the following two mutually exclusive service projects with project lives of three years and…
A: Year Cash Flow  Project A Present Value of Cash Flow =CashFlow/(1+InterestRate)^Year Working 0…
Q: Please show your work in excel format. Consider a property investment that you finance with 20%…
A: Answer is as follows:
Q: If a garden center is considering the purchase of a new tractor with an initial investment cost of…
A: The payback period is the total number of years required to recover the total cost of the…
Q: Perform a financial analysis of a project assuming that the projected costs and benefits for this…
A: Payback period: N/A NPV: $23,313 ROI: 8%
Q: The property appraisal district for Marin County has just installed new software to track…
A: The first step is to calculate the present worth of $150,000 & $50,000 in the tenth uyear with i…
Q: ount rate and a 50 year time period. ey will have to pay $280,000 immedia and per year for visiting…
A: We need to compute net present value of building extra parking space.
Q: Evaluate the following projects using the payback method assuming a rule of 3 years for payback.…
A: The Payback period is among the techniques of capital budgeting. It is defined as the length of the…
Q: Evaluate the following projects using the payback method assuming a rule of 3 years for payback.…
A: Payback Period is used for project evaluation by measuring the years required to recoup the initial…
Q: A machine can be purchased for $150,000 and used for five years, yielding the following net incomes.…
A: Definition: Cash payback method: The cash payback period is the expected time period which is…
Q: With the estimates shown below, Sarah needs to determine the tradein (replacement) value of machine…
A: The question is based on the concept of calculation of annual worth of two machine for replacement…
Q: Use the information provided below to calculate the following. Where applicable, use the present…
A: NPV is the difference between the present value of cash inflows and outflows. NPV >0 Accept the…