Use the NPV method to determine whether Juda Products should invest in the following projects: • Project A: Costs $265,000 and offers eight annual net cash inflows of $54,000. Juda Products requires an annual return of 16% on investments of this nature. • Project B: Costs $390,000 and offers 10 annual net cash inflows of $76,000. Juda Products demands an annual return of 14% on investments of this nature. 1. What is the NPV of each project? Assume neither project has a residual value. Round to two decimal places. 2. What is the maximum acceptable price to pay for each project? 3. What is the profitability index of each project? Round to two decimal places.
Use the NPV method to determine whether Juda Products should invest in the following projects: • Project A: Costs $265,000 and offers eight annual net cash inflows of $54,000. Juda Products requires an annual return of 16% on investments of this nature. • Project B: Costs $390,000 and offers 10 annual net cash inflows of $76,000. Juda Products demands an annual return of 14% on investments of this nature. 1. What is the NPV of each project? Assume neither project has a residual value. Round to two decimal places. 2. What is the maximum acceptable price to pay for each project? 3. What is the profitability index of each project? Round to two decimal places.
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
Related questions
Question
Use the NPV method to determine whether
Juda
Products should invest in the following projects:|
•
|
Project
A:
Costs
$265,000
and offers
eight
annual net $54,000.
Juda
Products requires an annual return of
16%
on investments of this nature. |
|
•
|
Project
B:
Costs
$390,000
and offers
10
annual net cash inflows of
$76,000.
Juda
Products demands an annual return of
14%
on investments of this nature. |
|
1.
|
What is the NPV of each project? Assume neither project has a residual value. Round to two decimal places.
|
|
2.
|
What is the maximum acceptable price to pay for each project?
|
|
3.
|
What is the profitability index of each project? Round to two decimal places.
|
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