Project A requires an original investment of $53,400. The project will yield cash flows of $15,400 per year for 4 years. Project B has a computed net present value of $2,990 over a 4-year life. Project A could be sold at the end of 4 years for a price of $14,900.Following is a table for the present value of $1 at compound interest:Year 6% 10% 12%1 0.943 0.909 0.8932 0.890 0.826 0.7973 0.840 0.751 0.7124 0.792 0.683 0.6365 0.747 0.621 0.567 Following is a table for the present value of an annuity of $1 at compound interest:Year 6% 10% 12%1 0.943 0.909 0.8932 1.833 1.736 1.6903 2.673 2.487 2.4024 3.465 3.170 3.0375 4.212 3.791 3.605 Use the tables above.a. Determine the net present value of Project A over a 4-year life with salvage value assuming a minimum rate of return of 12%. Round your answer to two decimal places.$fill in the blank 1b. Which project provides the greatest net present value?

The difference between the present value of cash inflows and present value of cash outflows is net…

Answered: Project A requires an original…

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 3BE

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Project A requires an original investment of $53,400. The project will yield cash flows of $15,400 per year for 4 years. Project B has a computed net present value of $2,990 over a 4-year life. Project A could be sold at the end of 4 years for a price of $14,900.

Following is a table for the present value of $1 at compound interest:

Year	6%	10%	12%
1	0.943	0.909	0.893
2	0.890	0.826	0.797
3	0.840	0.751	0.712
4	0.792	0.683	0.636
5	0.747	0.621	0.567

Following is a table for the present value of an annuity of $1 at compound interest:

Year	6%	10%	12%
1	0.943	0.909	0.893
2	1.833	1.736	1.690
3	2.673	2.487	2.402
4	3.465	3.170	3.037
5	4.212	3.791	3.605

Use the tables above.

a. Determine the net present value of Project A over a 4-year life with salvage value assuming a minimum rate of return of 12%. Round your answer to two decimal places.
$fill in the blank 1

b. Which project provides the greatest net present value?

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