Phoenix Company is considering investments in projects C1 and C2. Both require an initial investment of $234,000 and would yield the following annual net cash flows. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Net cash flows Project C1 Project C2 Year 1 $ 14,000 $ 98,000 Year 2 110,000 98,000 Year 3 170,000 98,000 Totals $ 294,000 $ 294,000 a. The company requires a 10% return from its investments. Compute net present values using factors from Table B.1 in Appendix B to determine which projects, if any, should be accepted. b. Using the answer from part a, is the internal rate of return higher or lower than 10% for (i) Project C1 and (ii) Project C2? Hint: It is not necessary to compute IRR to answer this question.
Phoenix Company is considering investments in projects C1 and C2. Both require an initial investment of $234,000 and would yield the following annual net cash flows. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Net cash flows Project C1 Project C2 Year 1 $ 14,000 $ 98,000 Year 2 110,000 98,000 Year 3 170,000 98,000 Totals $ 294,000 $ 294,000 a. The company requires a 10% return from its investments. Compute net present values using factors from Table B.1 in Appendix B to determine which projects, if any, should be accepted. b. Using the answer from part a, is the internal rate of return higher or lower than 10% for (i) Project C1 and (ii) Project C2? Hint: It is not necessary to compute IRR to answer this question.
Financial Reporting, Financial Statement Analysis and Valuation
8th Edition
ISBN:9781285190907
Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Chapter12: Valuation: Cash-flow Based Approaches
Section: Chapter Questions
Problem 12PC
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Phoenix Company is considering investments in projects C1 and C2. Both require an initial investment of $234,000 and would yield the following annual net cash flows. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.)
| Net cash flows | Project C1 | Project C2 |
|---|---|---|
| Year 1 | $ 14,000 | $ 98,000 |
| Year 2 | 110,000 | 98,000 |
| Year 3 | 170,000 | 98,000 |
| Totals | $ 294,000 | $ 294,000 |
a. The company requires a 10% return from its investments. Compute
b. Using the answer from part a, is the
Transcribed Image Text:Complete this question by entering your answers in the tabs below.
Required A
Required B
Using the answer from part a, is the internal rate of return higher or lower than 10% for (i) Project C1 and (ii) Project
C2? Hint: It is not necessary to compute IRR to answer this question.
0 Is the internal rate of return higher or lower than 10% for Project C1?
(i) Is the internal rate of return higher or lower than 10% for Project C2?
< Required A
Required B>
Transcribed Image Text:Required A
Required B
The company requires a 10% return from its investments. Compute net present values using factors from Table B.1 in
Appendix B to determine which projects, if any, should be accepted. (Negative net present values should be indicated with a
minus sign. Round your present value factor to 4 decimals. Round your answers to the nearest whole dollar.)
Present Value
of 1 at 10%
Present Value of
Net Cash Flows
Project C1
Net Cash Flows
Year 1
Year 2
Year 3
Totals
Present Value
Project C2
Present Value of
Net Cash Flows
Net Cash Flows
of 1 at 10%
Year 1
Year 2
=
Year 3
Totals
Which projects, if any, should be accepted
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