Net Present Value Method, Internal Rate of Return Method, and Analysis Net Present Value Method, Internal Rate of Return Method, and AnalysisThe management of Quest Media Inc. is considering two capital investment projects. The estimated net cash flows from each project are as follows:YearRadio StationTV Station1$330,000$660,0002330,000660,0003330,000660,0004330,000660,000Present Value of an Annuity of $1 at Compound InterestYear6%10%12%15%20%10.9430.9090.8930.8700.83321.8331.7361.6901.6261.52832.6732.4872.4022.2832.1063.4653.1703.0372.8552.58954.2123.7913.6053.3522.9914.9174.3554.1113.7843.3265.5824.8684.5644.1603.6058.6.2105.3354.9684.4873.8379.6.8025.7595.3284.7724.031107.3606.1455.6505.0194.192The radio station requires an investment of $1,002,210, while the TV station requires an investment of $1,884,300. No residual value is expected from either project. Required:1a. Compute the net present value for each project. Use a rate of 10% and the present value of an annuity of $1 in the table above. If required, use the minus sign to indicate a negative net present value. If required, roundto the nearest whole dollar.Radio StationTV StationPresent value of annual net cash flows$4Less amount to be invested$Net present value$4$1b. Compute a present value index for each project. If required, round your answers to two decimal places.Present Value IndexRadio StationTV Station2. Determine the internal rate of return for each project by (a) computing a present value factor for an annuity of $1 and (b) using the present value of an annuity of $1 in the table above. If required, round your presentvalue factor answers to three decimal places and internal rate of return to the nearest whole percent.Radio StationTV StationPresent value factor for an annuity of $1Internal rate of return%%3. The net present value, present value index, and internal rate of return all indicate that theis a better financial opportunity compared to thealthough both investments meetthe minimum return criterion of 10%.

Present value index Present value of future cash flows / Initial investment

Net Present Value Method, Internal Rate of Return Method, and Analysis The management of Quest Media Inc. is considering two capital investment projects. The estimated net cash flows from each project are as follows: Year Radio Station TV Station 1 $330,000 $660,000 2 330,000 660,000 3 330,000 660,000 4 330,000 660,000 Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1. 0.943 0.909 0.893 0.870 0.833 2. 1.833 1.736 1.690 1.626 1.528 3 2.673 2.487 2.402 2.283 2.106 4 3.465 3.170 3.037 2.855 2.589 4.212 3.791 3.605 3.352 2.991 4.917 4.355 4.111 3.784 3.326 7 5.582 4.868 4.564 4.160 3.605 6.210 5.335 4.968 4.487 3.837 6.802 5.759 5.328 4.772 4.031 10 7.360 6.145 5.650 5.019 4.192 The radio station requires an investment of $1,002,210, while the TV station requires an investment of $1,884,300. No residual value is expected from either project.

Net Present Value Method, Internal Rate of Return Method, and Analysis The management of Quest Media Inc. is considering two capital investment projects. The estimated net cash flows from each project are as follows: Year Radio Station TV Station 1 $330,000 $660,000 2 330,000 660,000 3 330,000 660,000 4 330,000 660,000 Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1. 0.943 0.909 0.893 0.870 0.833 2. 1.833 1.736 1.690 1.626 1.528 3 2.673 2.487 2.402 2.283 2.106 4 3.465 3.170 3.037 2.855 2.589 4.212 3.791 3.605 3.352 2.991 4.917 4.355 4.111 3.784 3.326 7 5.582 4.868 4.564 4.160 3.605 6.210 5.335 4.968 4.487 3.837 6.802 5.759 5.328 4.772 4.031 10 7.360 6.145 5.650 5.019 4.192 The radio station requires an investment of $1,002,210, while the TV station requires an investment of $1,884,300. No residual value is expected from either project.

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 19E

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