1.
Net present value method is the method which is used to compare the initial
To calculate: The net present value of under graduate degree.
2.
To calculate: The net present value of master of accountancy degree.
3.
To discuss: The net advantage or disadvantage of pursuing a graduate degree based on the net present value.
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Bundle: Accounting, Chapters 1-13, 26th + Working Papers, Chapters 1-17 For Warren/reeve/duchac's Accounting, 26th And Financial Accounting, 14th + ... For Warren/reeve/duchac's Accounting, 26th
- Your company is planning to purchase a new log splitter for is lawn and garden business. The new splitter has an initial investment of $180,000. It is expected to generate $25,000 of annual cash flows, provide incremental cash revenues of $150,000, and incur incremental cash expenses of $100,000 annually. What is the payback period and accounting rate of return (ARR)?arrow_forwardA restaurant is considering the purchase of new tables and chairs for their dining room with an initial investment cost of $515,000, and the restaurant expects an annual net cash flow of $103,000 per year. What is the payback period?arrow_forwardIf a copy center is considering the purchase of a new copy machine with an initial investment cost of $150,000 and the center expects an annual net cash flow of $20,000 per year, what is the payback period?arrow_forward
- Use the NPV method to determine whether Stenback Products should invest in the following projects: Project A: Costs $260,000 and offers eight annual net cash inflows of $54,000. Stenback Products requires an annual return of 14% on investments of this nature. Project B: Costs $395,000 and offers 10 annual net cash inflows of $77,000. Stenback Products demands an annual return of 12% on investments of this nature. (Click the icon to view Present Value of $1 table.) (Click the icon to view Present Value of Ordinary Annuity of $1 table.) Read the requirements. Requirement 1. What is the NPV of each project? Assume neither project has a residual value. Round to two decimal places. (Enter any factor amounts to three decimal places, X.XXX. Use parentheses or a minus sign for a negative net present value.) Caclulate the NPV (net present value) of each project. Begin by calculating the NPV of Project A Net Cash Inflow Project A: Years 1-8 0 Present value of annuity Investment Net present value…arrow_forwardUse the NPV method to determine whether Kyler Products should invest in the following projects: Project A: Costs $280,000 and offers seven annual net cash inflows of $52,000. Kyler Products requires an annual return of 12% on investments of this nature. Project B: Costs $385,000 and offers 9 annual net cash inflows of $75,000. Kyler Products demands an annual return of 10% on investments of this nature. (Click the icon to view Present Value of $1 table.) (Click the icon to view Present Value of Ordinary Annuity of $1 table.) Read the requirements. Requirement 1. What is the NPV of each project? Assume neither project has a residual value. Round to two decimal places. (Enter any factor amounts to three decimal places, X.XXX. Use parentheses or a minus sign for a negative net present value.) Caclulate the NPV (net present value) of each project. Begin by calculating the NPV of Project A. Project A: Years 1-7 0 Present value of annuity Investment Net present value of Project A Calculate…arrow_forwardUse the NPV method to determine whether Kyler Products should invest in the following projects: Project A: Costs $280,000 and offers seven annual net cash inflows of $52,000. Kyler Products requires an annual return of 12% on investments of this nature. Project B: Costs $385,000 and offers 9 annual net cash inflows of $75,000. Kyler Products demands an annual return of 10% on investments of this nature. (Click the icon to view Present Value of $1 table.) (Click the icon to view Present Value of Ordinary Annuity of $1 table.) Read the requirements. Project B: Years 1-9 0 Project A Project B Present value of annuity Investment Net present value of Project B Requirement 2. What is the maximum acceptable price to pay for each project? Maximum Project A Project B Net Cash Inflow Acceptable Price Annuity PV Factor (i=10%, n=9) Requirement 3. What is the profitability index of each project? (Round to two decimal places, X.XX.) Select the formula, then enter the amounts to calculate the…arrow_forward
- A financial manager is considering two possible sources of funds necessary to finance a $10,000,000 investment that will yield $1,500,000 before interest and taxes. Alternative one is a short-term commercial bank loan with an interest rate of 8 percent for one year. The alternative is a five-year term loan with an interest rate of 10 percent. The firm's income tax rate is 30 percent.  What are the crucial considerations when selecting between short- and long-term sources of finance?arrow_forwardUse this information for Wyoming Corporation to answer the questions that follow. ​The management of Wyoming Corporation is considering the purchase of a new machine costing $375,000. The company's desired rate of return is 6%. The present value factor for an annuity of $1 at interest of 6% for five years is 4.212. In addition to the foregoing information, use the following data in determining the acceptability of this investment: ​Year Income fromOperations Net CashFlow 1 $18,750 $93,750 2 18,750 93,750 3 18,750 93,750 4 18,750 93,750 5 18,750 93,750 ​The present value index for this investment isarrow_forwardYou are asked to evaluate the following two projects for the Norton Corporation. Using the net present value method combined with the profitability index approach described in footnote 2 of this chapter, which project would you select? Use a discount rate of 14 percent. Project X (videotapes of the weather report) ($20,000 investment) Year Cash Flow 1. $10,000 2 8,000 3 9.000 4 8.600 Project X (videotapes of the weather report) ($40,000 investment) Year Cash Flow $20,000 2 13,000 3 14.000 4 16.800arrow_forward
- QUESTION: Before evaluating the economic merits of a proposed investment, the XYZ Corporation insists that its engineers develop a cash-flow diagram of the proposal. An investment of $10,000 can be made that will produce uniform annual revenue of $5,310 for five years and then have a market (recovery) value of $2,000 at the end of year (EOY) five. Annual expenses will be $3,000 at the end of each year for operating and maintaining the project. Draw a cash-flow diagram for the five-year life of the project. Use the corporation's viewpoint.arrow_forwardUse this information for Wyoming Corporation to answer the question that follow.The management of Wyoming Corporation is considering the purchase of a new machine costing $375,000. The company's desired rate of return is 6%. The present value factor for an annuity of $1 at interest of 6% for five years is 4.212. In addition to the foregoing information, use the following data in determining the acceptability of this investment: Year Income fromOperations Net CashFlow 1 $18,750  $93,750  2 18,750  93,750  3 18,750  93,750  4 18,750  93,750  5 18,750  93,750  The cash payback period for this investment isarrow_forwardYou are considering investment in the following projects. Assume that your discount rate is 12% per year for both projects. Project A’s cash flows Year 0 Year 1 Year 2 Year 3 Year 4 -$12,000 $7,000 $3,000 $2,000 $1,500  Project B’s cash flows Year 0 Year 1 Year 2 Year 3 Year 4 -$11,000 $6,000 $2,500 $1,500 $1,200 (d) Now suppose that your discount rate is 5% per year for both projects. If projects A and B are mutually exclusive which project will you accept, if any? (e) Calculate Payback Period for project A and Payback Period for project B. (f) Suppose that the payback cutoff for both projects is 3.5 years, which project (if any) should be accepted using payback periods rule? (Disregard NPV and IRR rules in answering this question)arrow_forward
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