X construction is considering two projects to develop. The estimated net cash flow from each project is as follows: Year Project X ($) Project Y ($) 1 110,000 75,000 2 65,000 150,000 3 100,000 60,000 4 115,000 55,000 5 35,000 60,000 Total 425,000 400,000 Each project requires an investment of $ 200,000. The cost of capital is 10%. Require to a) Calculate Net Present Value, Payback period, ARR and Profitability Index. b) Which Project is to be recommended to develop based on NPV, Profitability Index, Payback period and ARR? Suggest
X construction is considering two projects to develop. The estimated net cash flow from each project is as follows: Year Project X ($) Project Y ($) 1 110,000 75,000 2 65,000 150,000 3 100,000 60,000 4 115,000 55,000 5 35,000 60,000 Total 425,000 400,000 Each project requires an investment of $ 200,000. The cost of capital is 10%. Require to a) Calculate Net Present Value, Payback period, ARR and Profitability Index. b) Which Project is to be recommended to develop based on NPV, Profitability Index, Payback period and ARR? Suggest
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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Question
X construction is considering two projects to develop. The estimated net cash flow from each project is
as follows:
Year
Project X ($)
Project Y ($)
1
110,000
75,000
2
65,000
150,000
3
100,000
60,000
4
115,000
55,000
5
35,000
60,000
Total
425,000
400,000
Each project requires an investment of $ 200,000.
The cost of capital is 10%.
Require to
a) Calculate
b) Which Project is to be recommended to develop based on NPV, Profitability Index, Payback period and ARR? Suggest
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