The following investment opportunities are available to an investment center manager; Project Initial Investment Annual Earnings A S800.000 S90,000 B S100,000 s20,000 C 300,000 S25,000 D $400,000 S60,000 Required: a. If the investment is currently making a return on investment of 16 percent, which project (s) would the manager want to pursue? b. If the cost of capital is 10 percent and the annual earnings approximate cash flows excluding finance charges, which project(s) should be chosen? c. Suppose only one project can be chosen and the annual eamings approximate cash flows excluding finance charges. Which project should be chosen?
The following investment opportunities are available to an investment center manager; Project Initial Investment Annual Earnings A S800.000 S90,000 B S100,000 s20,000 C 300,000 S25,000 D $400,000 S60,000 Required: a. If the investment is currently making a return on investment of 16 percent, which project (s) would the manager want to pursue? b. If the cost of capital is 10 percent and the annual earnings approximate cash flows excluding finance charges, which project(s) should be chosen? c. Suppose only one project can be chosen and the annual eamings approximate cash flows excluding finance charges. Which project should be chosen?
Financial And Managerial Accounting
15th Edition
ISBN:9781337902663
Author:WARREN, Carl S.
Publisher:WARREN, Carl S.
Chapter26: Capital Investment Analysis
Section: Chapter Questions
Problem 3CMA
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Transcribed Image Text:The following investment opportunities are available to an investment center manager;
Project Initial Investment Annual Earnings
A $800.000 $90,000
B $100,000 $20,000
C S300,000 S25,000
D $400,000 S60,000
Required:
a. If the investment is currently making a return on investment of 16 percent, which project (s) would the
manager want to pursue?
b. If the cost of capital is 10 percent and the annual earnings approximate cash flows excluding finance
charges, which project(s) should be chosen?
c. Suppose only one project can be chosen and the annual eamings approximate cash flows excluding
finance charges. Which project should be chosen?
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