Answered: rane Corporation has decided to invest…

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 1MAD: San Lucas Corporation is considering investment in robotic machinery based upon the following...

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Question

Crane Corporation has decided to invest in renewable energy sources to meet part of its energy needs for production. It is considering solar power versus wind power. After considering cost savings as well as incremental revenues from selling excess electricity into the power grid, it has determined the following.

	Solar	Wind
Present value of annual cash flows	$56,090	$130,820
Initial investment	$39,500	$105,500

Determine the net present value and profitability index of each project. (If the net present value is negative, use either a negative sign preceding the number eg -45 or parentheses eg (45). Round present value answers to 0 decimal places, e.g. 125 and profitability index answers to 2 decimal places, e.g. 15.25.)

	Solar	Wind
Net present value	$enter a dollar amount rounded to 0 decimal places	$enter a dollar amount rounded to 0 decimal places
Profitability index	enter the number rounded to 2 decimal places	enter the number rounded to 2 decimal places