Project A requires an original investment of $55,700. The project will yield cash flows of $16,200 per year for seven years. Project B has a calculated net present value of $3,470 over a four-year life. Project A could be sold at the end of four years for a price of $14,800. Below is a table for the present value of $1 at Compound interest. Year 10% 0.909 0.826 0.751 0.683 0.621 1 2 3 4 1 2 5 Below is a table for the present value of an annuity of $1 at compound interest. Year 10% 12% 0.909 0.893 1.736 1.690 2.487 2.402 3.170 3.037 3.791 3.605 3 6% 0.943 0.890 0.840 0.792 0.747 4 6% 0.943 1.833 2.673 3.465 12% 0.893 0.797 0.712 0.636 0.567 5 Use the tables above. (a) Using the present value tables above, determine the net present value of Project A over a four-year life with salvage value assuming a minimum rate of return of 12%. Round your answer to two decimal places. Enter negative values as negative numbers. 4.212 (b) Which project provides the greatest net present value?

Project A requires an original investment of $55,700. The project will yield cash flows of $16,200 per year for seven years. Project B has a calculated net present value of $3,470 over a four-year life. Project A could be sold at the end of four years for a price of $14,800. Below is a table for the present value of $1 at Compound interest. Year 10% 0.909 0.826 0.751 0.683 0.621 1 2 3 4 1 2 5 Below is a table for the present value of an annuity of $1 at compound interest. Year 10% 12% 0.909 0.893 1.736 1.690 2.487 2.402 3.170 3.037 3.791 3.605 3 6% 0.943 0.890 0.840 0.792 0.747 4 6% 0.943 1.833 2.673 3.465 12% 0.893 0.797 0.712 0.636 0.567 5 Use the tables above. (a) Using the present value tables above, determine the net present value of Project A over a four-year life with salvage value assuming a minimum rate of return of 12%. Round your answer to two decimal places. Enter negative values as negative numbers. 4.212 (b) Which project provides the greatest net present value?

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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