Present Value of an Annuity of $1 at Compound InterestYear6%10%12%15%20%123456789100.9431.8332.6733.4654.2124.9175.5826.2106.8027.360Amount to be investedNet present value0.9091.7362.4873.170Amount to be invested3.7914.3554.868Net present value5.3355.7596.1450.8931.6902.4023.0373.6054.111Present value of annual net cash flows4.5644.9685.3285.650Total present value of net cash flow0.8701.6262.2832.8553.3533.7854.1604.4874.7725.0190.8331.528Required:1. For each project, compute the net present value. Use the present value of an annuity of $1 table above. Ignorethe unequal lives of the projects. If required, round to the nearest dollar.Office ExpansionServers Upgrade513,8752.1062.5892.9913.3263.6053.8374.0314.192490,00023,8752. For each project, compute the net present value, assuming that the office expansion is adjusted to a 4-yearlife for purposes of analysis. Use the present value of $1 table above.Office Expansion494,105 X490,000501,105490,0004,105 X $11,105Servers Upgrade501,105 X490,00011,105 X The investment committee of Sentry Insurance Co. is evaluating two projects, office expansion and upgrade tocomputer servers. The projects have different useful lives, but each requires an investment of $490,000. Theestimated net cash flows from each project are as follows:Year123Year45612The committee has selected a rate of 12% for purposes of net present value analysis. It also estimates that theresidual value at the end of each project's useful life is $0, but at the end of the fourth year, the office expansion'sresidual value would be $180,000.7891034560.9430.890Present Value of $1 at Compound Interest6%10%12%0.8400.7920.7470.7050.6650.627Net CashFlowsOfficeExpansion$125,000125,000125,000125,000125,000125,0000.5920.5580.9090.8260.7510.6830.6210.5640.513Net CashFlowsServers0.4670.424$165,000165,000165,000165,0000.3860.8930.7970.7120.6360.5670.5070.4520.4040.3610.32215%0.8700.7560.6580.5720.4970.4320.3760.3270.2840.24720%0.8330.6940.5790.4820.4020.3350.2790.2330.1940.162

Cost of capital: Cost of capital is known as the cost of expending for certain purchases of fixed…

Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 2 3 4 5 6 7 8 D 0.943 1.833 2.673 3.465 4.212 4.917 5.582 6.210 6.802 0.909 1.736 2.487 3.170 3.791 4.355 4.868 5.335 5 750 0.893 1.690 2.402 3.037 3.605 4.111 4.564 4.968 5.328 0.870 1.626 2.283 2.855 3.353 3.785 4.160 4.487 4.772 0.833 1.528 2.106 2.589 2.991 3.326 3.605 3.837 4. 031

Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 2 3 4 5 6 7 8 D 0.943 1.833 2.673 3.465 4.212 4.917 5.582 6.210 6.802 0.909 1.736 2.487 3.170 3.791 4.355 4.868 5.335 5 750 0.893 1.690 2.402 3.037 3.605 4.111 4.564 4.968 5.328 0.870 1.626 2.283 2.855 3.353 3.785 4.160 4.487 4.772 0.833 1.528 2.106 2.589 2.991 3.326 3.605 3.837 4. 031

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 5PA

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Similar questions

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