Managerial Accounting, Student Value Edition Plus MyLab Accounting with Pearson eText -- Access Card Package (5th Edition)
5th Edition
ISBN: 9780134642093
Author: Karen W. Braun, Wendy M. Tietz
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Question
Chapter 12, Problem 12.35AE
1.
To determine
The rank of projects as per their capital budgeting method values.
2.
To determine
To conclude: That which method(s) is(are) the best for evaluating capital investment projects in general.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
What are the benefits of capital budgeting tools to educational institutions? How does they use capital budgeting tools? Provide examples and explain. Minimum 200 words
This homework submission should include all calculations for part (a), completed on the designated tab of the Homework Student Workbook, and a document explaining the implications of your findings for the business or business transaction. After reading this week’s resources, respond to the following:You are a financial analyst for the Brittle Company. The director of capital budgeting has asked you to analyze two proposed capital investments: Projects X and Y. Each project has a cost of $10,000, and the cost of capital for each is 12%. The projects' expected net cash flows are shown in the table below.
Expected Net Cash Flows
Year
Project X
Project Y
0
– $10,000
– $10,000
1
6,500
3,500
2
3,000
3,500
3
3,000
3,500
4
1,000
3,500
Use the Workbook to calculate each project's net present value (NPV), internal rate of return (IRR), modified internal rate of return (MIRR), and profitability index (PI).
Which project or projects should…
Please set the following capital budgeting problem up in excel. Upload your answer. Include formulas where appropriate.
You are responsible to make a recommendation to the college regarding the upcoming capital projects. Be sure to evaluate each project using payback, NPV, IRR and PI capital budgeting techniques. We do not have enough money to do both projects, please evaluate both and make your recommendation. Both projects will require an original cash investment of $1,500,000. We are considering a renovation to the classrooms (project A) and a renovation to the library (Project B). The classroom update will provide revenue of $700,000 and the library $900,000 year one. For the classroom update, cash inflow will be $300,000 years 1 & 2, $400,000 years 3 & 4 and $100,000 each year 5 and beyond. The library will have cash inflow of $500,000 years 1, 2, &3 and 100,000 each additional year after that. The college has a payback policy of 5 years and our cost…
Chapter 12 Solutions
Managerial Accounting, Student Value Edition Plus MyLab Accounting with Pearson eText -- Access Card Package (5th Edition)
Ch. 12 - Prob. 1QCCh. 12 - (Learning Objective 2) After identifying potential...Ch. 12 - Prob. 3QCCh. 12 - Prob. 4QCCh. 12 - Prob. 5QCCh. 12 - Prob. 6QCCh. 12 - Prob. 7QCCh. 12 - Prob. 8QCCh. 12 - Prob. 9QCCh. 12 - (Learning Objective 5) Which of the following...
Ch. 12 - Order the capital budgeting process (Learning...Ch. 12 - Prob. 12.2SECh. 12 - Prob. 12.3SECh. 12 - Prob. 12.4SECh. 12 - Prob. 12.5SECh. 12 - Prob. 12.6SECh. 12 - Prob. 12.7SECh. 12 - Prob. 12.8SECh. 12 - Prob. 12.9SECh. 12 - Prob. 12.10SECh. 12 - Prob. 12.11SECh. 12 - Prob. 12.12SECh. 12 - Prob. 12.13SECh. 12 - Prob. 12.14SECh. 12 - Prob. 12.15SECh. 12 - Identify ethical standards violated (Learning...Ch. 12 - Prob. 12.17AECh. 12 - Compute payback period and analyze changes...Ch. 12 - Prob. 12.19AECh. 12 - Prob. 12.20AECh. 12 - Prob. 12.21AECh. 12 - Prob. 12.22AECh. 12 - Calculate the payback and NPV for a sustainable...Ch. 12 - Prob. 12.24AECh. 12 - Prob. 12.25AECh. 12 - Prob. 12.26AECh. 12 - Prob. 12.27AECh. 12 - Prob. 12.28AECh. 12 - Prob. 12.29AECh. 12 - Prob. 12.30AECh. 12 - Prob. 12.31AECh. 12 - Prob. 12.32AECh. 12 - Prob. 12.33AECh. 12 - Prob. 12.34AECh. 12 - Prob. 12.35AECh. 12 - Prob. 12.36BECh. 12 - Prob. 12.37BECh. 12 - Prob. 12.38BECh. 12 - Prob. 12.39BECh. 12 - Prob. 12.40BECh. 12 - Prob. 12.41BECh. 12 - Prob. 12.42BECh. 12 - Prob. 12.43BECh. 12 - Prob. 12.44BECh. 12 - Prob. 12.45BECh. 12 - Prob. 12.46BECh. 12 - Prob. 12.47BECh. 12 - Prob. 12.48BECh. 12 - Prob. 12.49BECh. 12 - Prob. 12.50BECh. 12 - Prob. 12.51BECh. 12 - Prob. 12.52BECh. 12 - Prob. 12.53BECh. 12 - Prob. 12.54BECh. 12 - Prob. 12.55APCh. 12 - Prob. 12.56APCh. 12 - Prob. 12.57APCh. 12 - Prob. 12.58APCh. 12 - Prob. 12.59BPCh. 12 - Prob. 12.60BPCh. 12 - Evaluate an investment using all four methods...Ch. 12 - Prob. 12.62BPCh. 12 - Prob. 12.63SCCh. 12 - Discussion Questions 1. Describe the capital...Ch. 12 - Prob. 12.65ACTCh. 12 - Prob. 12.66ACTCh. 12 - Prob. 12.67ACT
Knowledge Booster
Similar questions
- You are a financial analyst for the Brittle Company. The director of capital budgeting has asked you to analyze two proposed capital investments: Projects X and Y. Each project has a cost of $10,000, and the cost of capital for each is 12%. The projects' expected net cash flows are shown in the table below. Use the Homework Student Workbook to calculate each project's net present value (NPV), internal rate of return (IRR), modified internal rate of return (MIRR), and profitability index (PI). NPVx = NPVy = IRRx = IRRy = TVx = TVy = MIRRx = MIRRy = PVx = PVy = PIx = PIy = 2. Which project or projects should be accepted if they are independent? 3.Which project or projects should be accepted if they are mutually exclusive?arrow_forwardAnswer the following question with a clear explanation, showing any steps or processes used to reach the answer. Explain your process as though you are teaching the concept to a student who is a beginner at finance.A corporation makes an investment of $20,000 that will provide the following cash flows after the corresponding amounts of time:Year 1 - $10,000Year 2 - $10,000Year 3 - $2,000Should the company make this investment?* What is the net present value at a 7 percent discount rate? Round your answer to two decimal points. Provide a step-by-step explanation for how you arrived at your solution as though you were teaching a student to solve this type of problem.*arrow_forwardCapital Budgeting Decisions A college intern working at Anderson Paints evaluated potential investments using the firm’s average required rate of return (r) as the discount rate in the evaluation process and he produced the following report for you as the capital budgeting manager at Anderson Paints: Project NPV IRR Risk LOM $1,500 12.5% High QUE 0 11.0 Low YUP (800) 10.0 Average DOG (150) 9.5 Low As the capital investment manager you must account for the risks associated with capital budgeting projects before making final recommendations and decisions. The company’s capital investment risk management policy calls for an adjustment of the firm’s average required rate of return by plus/minus 2% if a project’s…arrow_forward
- You are a financial manager for the ACME Corporation. The shareholders of ACME Corporation would like to know the methods you use to make capital budgeting decision(s). Please explain the methods you use to make capital budgeting decisions. Which method(s) is/are the best? Why? Please explain your reasoning by providing quality argument.arrow_forwardCapital Budgeting Assume you are evaluating two mutually exclusive projects, the cash flows of which appear below and that your company uses a cost of capital of 13% to evaluate projects such as these. Time Project A Cash Flows Project B Cash Flows 0 -$46,800 -$63,600 1 -21,600 20,400 2 43,200 20,400 3 43,200 20,400 4 43,200 20,400 5 -28,800 20,400 Calculate the payback period and discounted payback period for projects A & B.arrow_forwardCapital Budgeting Assume you are evaluating two mutually exclusive projects, the cash flows of which appear below and that your company uses a cost of capital of 13% to evaluate projects such as these. Time Project A Cash Flows Project B Cash Flows 0 -$46,800 -$63,600 1 -21,600 20,400 2 43,200 20,400 3 43,200 20,400 4 43,200 20,400 5 -28,800 20,400 Sketch the NPV profile for projects A & B.arrow_forward
- Capital Budgeting Assume you are evaluating two mutually exclusive projects, the cash flows of which appear below and that your company uses a cost of capital of 13% to evaluate projects such as these. Time Project A Cash Flows Project B Cash Flows 0 -$46,800 -$63,600 1 -21,600 20,400 2 43,200 20,400 3 43,200 20,400 4 43,200 20,400 5 -28,800 20,400 Determine the crossover point for these projects’ NPV profiles.arrow_forwardCapital Budgeting Assume you are evaluating two mutually exclusive projects, the cash flows of which appear below and that your company uses a cost of capital of 13% to evaluate projects such as these. Time Project A Cash Flows Project B Cash Flows 0 -$46,800 -$63,600 1 -21,600 20,400 2 43,200 20,400 3 43,200 20,400 4 43,200 20,400 5 -28,800 20,400 If Project A and Project B are independent, which project should be undertaken?arrow_forwardWhat is the second step of capital budgeting? a. Gathering the money for the investment b. Identifying potential projects c. Getting the accountant involved d. All of the abovearrow_forward
- Explain to boards members what is meant by capital budgeting and elaborate on five reasons why capital budgeting is of great importance to Bella company Ltd?arrow_forwardCapital Budgeting Assume you are evaluating two mutually exclusive projects, the cash flows of which appear below and that your company uses a cost of capital of 13% to evaluate projects such as these. Time Project A Cash Flows Project B Cash Flows 0 -$46,800 -$63,600 1 -21,600 20,400 2 43,200 20,400 3 43,200 20,400 4 43,200 20,400 5 -28,800 20,400 Calculate the IRR and MIRR of projects A & B. Assume a reinvestment rate of 13% for the calculation of MIRR.arrow_forwardCapital Budgeting Assume you are evaluating two mutually exclusive projects, the cash flows of which appear below and that your company uses a cost of capital of 13% to evaluate projects such as these. Time Project A Cash Flows Project B Cash Flows 0 -$46,800 -$63,600 1 -21,600 20,400 2 43,200 20,400 3 43,200 20,400 4 43,200 20,400 5 -28,800 20,400 Assuming a cost of capital of 13%, which of these projects should be accepted?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,
Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSON
Intermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill Education
Financial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education
Accounting
Accounting
ISBN:9781337272094
Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:Cengage Learning,
Accounting Information Systems
Accounting
ISBN:9781337619202
Author:Hall, James A.
Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...
Accounting
ISBN:9780134475585
Author:Srikant M. Datar, Madhav V. Rajan
Publisher:PEARSON
Intermediate Accounting
Accounting
ISBN:9781259722660
Author:J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:9781259726705
Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:McGraw-Hill Education