There are two projects under consideration by the Rainbow factory. Each of the projects will require an initial investment of $35,000 and is expected to generate the following cash flows: First Year Second Year Third Year Total Alpha Project $32,500 $23,000 $5,000 $60,500 Beta Project 7,500 24,000 28,500 60,000 (Click here to see present value and future value tables) A. If the discount rate is 10%, compute the NPV of each project. Round your present value factor to three decimal places and final answer to answer to 2 decimal places. Alpha Project $ Beta Project $ B. Which project should be recommended.
There are two projects under consideration by the Rainbow factory. Each of the projects will require an initial investment of $35,000 and is expected to generate the following cash flows: First Year Second Year Third Year Total Alpha Project $32,500 $23,000 $5,000 $60,500 Beta Project 7,500 24,000 28,500 60,000 (Click here to see present value and future value tables) A. If the discount rate is 10%, compute the NPV of each project. Round your present value factor to three decimal places and final answer to answer to 2 decimal places. Alpha Project $ Beta Project $ B. Which project should be recommended.
Chapter9: Capital Budgeting Techniques
Section: Chapter Questions
Problem 7PROB
Related questions
Question
Transcribed Image Text:Homework Assignment #13
Print Item
There are two projects under consideration by the Rainbow factory. Each of the projects will require an initial investment of $35,000 and is expected to generate the following cash flows:
First Year
Second Year
Third Year
Total
Alpha Project
$32,500
$23,000
$5,000
$60,500
Beta Project
7,500
24,000
28,500
60,000
(Click here to see present value and future value tables)
A. If the discount rate is 10%, compute the NPV of each project. Round your present value factor to three decimal places and final answer to answer to 2 decimal places.
Alpha Project $
Beta Project $
B. Which project should be recommended.
Transcribed Image Text:< Principles of Accounting, Vol... T ime Value of Money
E Table of contents
Search this book
E My highlights
B Print
Present Value of $1 Table
1
Factor =
(1 + i)"
Rate (i)
1%
2%
3%
5%
8%
10%
12%
15%
20%
1
0.990
0.980
0.971
0.952
0.926
0.909
0.893
0.870
0.833
0.980
0.961
0.943
0.907
0.857
0.826
0.797
0.756
0.694
3
0.971
0.942
0.915
0.864
0.794
0.751
0.712
0.658
0.579
4
0.961
0.924
0.888
0.823
0.735
0.683
0.636
0.572
0.482
0.952
0.906
0.863
0.784
0.681
0.621
0.567
0.497
0.402
0.942
0.888
0.837
0.746
0.630
0.564
0.507
0.432
0.335
7
0.933
0.871
0.813
0.711
0.583
0.513
0.452
0.376
0.279
8
0.924
0.853
0.789
0.677
0.540
0.467
0.404
0.327
0.233
9
0.914
0.837
0.766
0.645
0.500
0.424
0.361
0.284
0.194
10
0.905
0.820
0.744
0.614
0.463
0.386
0.322
0.247
0.162
11
0.896
0.804
0.722
0.585
0.429
0.350
0.287
0.215
0.135
12
0.888
0.788
0.701
0.557
0.397
0.319
0.257
0.187
0.112
13
0.879
0.773
0.681
0.530
0.368
0.290
0.229
0.163
0.093
14
0.861
0.758
0.661
0.505
0.340
0.263
0.205
0.141
0.078
15
0.861
0.743
0.642
0.481
0.315
0.239
0.183
0.123
0.065
16
0.853
0.728
0.623
0.458
0.292
0.218
0.163
0.107
0.054
17
0.844
0.714
0.605
0.436
0.270
0.198
0.146
0.093
0.045
18
0.836
0.700
0.587
0.416
0.250
0.180
0.130
0.081
0.038
(u) poļua
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 2 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Fundamentals of Financial Management, Concise Edi…
Finance
ISBN:
9781285065137
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781285867977
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Fundamentals of Financial Management, Concise Edi…
Finance
ISBN:
9781285065137
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781285867977
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Fundamentals of Financial Management, Concise Edi…
Finance
ISBN:
9781305635937
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning