Please answer with explanations. Thx Net present value. Lepton Industries has three potential projects, all with an initial cost of $2,300,000. The capital budget for the year will allow Lepton to accept onlyone of the three projects. Given the discount rate and the future cash flow of each project in the following table, . determine which project Lepton should accept.Which project should Lepton accept? (Select the best response.)O A. Project SO B. Project ROC. Project QData TableO D. None of the projects(Click on the following icon in order to copy its contents into a spreadsheet.)Project RS800 000Cash FlowProject Q$600.000$600,000Project S$1,200,000$1,000,000Year 1Year 2$800.000Year 3$600.000$800.000$800,000Year 4$600.000$800,000$600,000Year 5$600,000$800,000$400.000Discount rate10%14%16%Click to select your answer and then click Check Answer.All parts showingPrintDoneCopyright © 2020 Pearson Education Inc. All rights reserved.I Terms of Use I Privacy Policy I Permissions I Contact UsieyuCVbinaltctrl

For selecting out of Project Q,R,S, we need to calculate the Present Value of the cash flows of each…

Net present value. Lepton Industries has three potential projects, all with an initial cost of $2,300,000. The capital budget for the year will. one of the three projects. Given the discount rate and the future cash flow of each project in the following table, . determine which proje Which project should Lepton accept? (Select the best response) OA Project S OB. Project R OC. Project Q OD. None of the projects O Data Table (Click on the following icon in order to copy its contents into a spread Cash Flow Project Q Project R Projec Year 1 $600,000 S800,000 $1,200,0

Net present value. Lepton Industries has three potential projects, all with an initial cost of $2,300,000. The capital budget for the year will. one of the three projects. Given the discount rate and the future cash flow of each project in the following table, . determine which proje Which project should Lepton accept? (Select the best response) OA Project S OB. Project R OC. Project Q OD. None of the projects O Data Table (Click on the following icon in order to copy its contents into a spread Cash Flow Project Q Project R Projec Year 1 $600,000 S800,000 $1,200,0

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 4PA: Net present value method, internal rate of return method, and analysis for a service company The...

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Staten Corporation is considering two mutually exclusive projects. Both require an initial outlay of 150,000 and will operate for five years. The cash flows associated with these projects are as follows: Statens required rate of return is 10%. Using the net present value method and the present value table provided in Appendix A, which of the following actions would you recommend to Staten? a. Accept Project X and reject Project Y. b. Accept Project Y and reject Project X. c. Accept Projects X and Y. d. Reject Projects X and Y.
Redbird Company is considering a project with an initial investment of $265,000 in new equipment that will yield annual net cash flows of $45,800 each year over its seven-year life. The companys minimum required rate of return is 8%. What is the internal rate of return? Should Redbird accept the project based on IRR?
There are two projects under consideration by the Rainbow factory. Each of the projects will require an initial investment or $28.000 and is expected to generate the following cash flows: If the discount rate is 5% compute the NPV of each project and make a recommendation of the project to be chosen.
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There are two projects under consideration by the Rainbow factory. Each of the projects will require an initial investment of $35,000 and is expected to generate the following cash flows: If the discount rate is 12%, compute the NPV of each project.
There are two projects under consideration by the Rainbow factory. Each of the projects will require an initial investment of $35,000 and is expected to generate the following cash flows: Use the information from the previous exercise to calculate the internal rate of return on both projects and make a recommendation on which one to accept. For further instructions on internal rate of return in Excel, see Appendix C.
Net present value method, internal rate of return method, and analysis for a service company The management of Advanced Alternative Power Inc. is considering two capital investment projects. The estimated net cash flows from each project are as follows: The wind turbines require an investment of 887,600, while the biofuel equipment requires an investment of 911,100. No residual value is expected from either project. Instructions 1. Compute the following for each project: A. The net present value. Use a rate of 6% and the present value of an annuity table appearing in Exhibit 5 of this chapter. B. A present value index. (Round to two decimal places.) 2. 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 table appearing in Exhibit 5 of this chapter. 3. What advantage does the internal rate of return method have over the net present value method in comparing projects?
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?
Project B cost $5,000 and will generate after-tax net cash inflows of $500 in year one, $1,200 in year two, $2,000 in year three. $2,500 in year four, and $2,000 in year five. What is the NPV using 8% as the discount rate? For further instructions on net present value in Excel, see Appendix C.
Clearcast Communications Inc. is considering allocating a limited amount of capital investment funds among four proposals. The amount of proposed investment, estimated operating income, and net cash flow for each proposal are as follows: The companys capital rationing policy requires a maximum cash payback period of three years. In addition, a minimum average rate of return of 12% is required on all projects. If the preceding standards are met, the net present value method and present value indexes are used to rank the remaining proposals. Instructions 1. Compute the cash payback period for each of the four proposals. 2. Giving effect to straight-line depreciation on the investments and assuming no estimated residual value, compute the average rate of return for each of the four proposals. Round to one decimal place. 3. Using the following format, summarize the results of your computations in parts (1) and (2). By placing the computed amounts in the first two columns on the left and by placing a check mark in the appropriate column to the right, indicate which proposals should be accepted for further analysis and which should be rejected. 4. For the proposals accepted for further analysis in part (3), compute the net present value. Use a rate of 12% and the present value table appearing in Exhibit 2 of this chapter. 5. Compute the present value index for each of the proposals in part (4). Round to two decimal places. 6. Rank the proposals from most attractive to least attractive, based on the present values of net cash flows computed in part (4). 7. Rank the proposals from most attractive to least attractive, based on the present value indexes computed in part (5). 8. Based on the analyses, comment on the relative attractiveness of the proposals ranked in parts (6) and (7).