Exercise 14-7 (Algo) Net Present Value Analysis of Two Alternatives [LO14-2] Perit Industries has $130,000 to invest in one of the following two projects: Project A Cost of equipment required Working capital investment required Annual cash inflows Salvage value of equipment in six years Life of the project $ 130,000 $0 $ 22,000 $ 8,300 6 years Project B se $ 130,000 $ 33,000 $0 6 years The working capital needed for project B will be released at the end of six years for investment elsewhere. Perit Industries' dis rate is 14%. Click here to view Exhibit 148-1 and Exhibit 148-2, to determine the appropriate discount factor(s) using tables.

Exercise 14-7 (Algo) Net Present Value Analysis of Two Alternatives [LO14-2] Perit Industries has $130,000 to invest in one of the following two projects: Project A Cost of equipment required Working capital investment required Annual cash inflows Salvage value of equipment in six years Life of the project $ 130,000 $0 $ 22,000 $ 8,300 6 years Project B se $ 130,000 $ 33,000 $0 6 years The working capital needed for project B will be released at the end of six years for investment elsewhere. Perit Industries' dis rate is 14%. Click here to view Exhibit 148-1 and Exhibit 148-2, to determine the appropriate discount factor(s) using tables.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Exercise 14-7 (Algo) Net Present Value Analysis of Two Alternatives [LO14-2) Perit Industries has $165,000 to invest. The company is trying to decide between two alternative uses of the funds. The alternatives are: Cost of equipment required working capital investment required Annual cash inflows Salvage value of equipment in six years Life of the project Project A $ 305,000 50 $ 21,000 1. Nat present valus project A 2. Net present value project B 3. Which investment alternative of either) would you recommend that the company accept? Project 8 $ 165,000 $ 56,000 years The working capital needed for project will be released at the end of six years for investment elsewhere. Perit Industries' discount rate is 14%. Click here to view Exhibit 148-1 and Exhibit 148-2, to determine the appropriate discount factors) using tables. Required: 1. Compute the net present value of Project A. (Enter negative values with a minus sign. Round your final answer to the nearest whole dollar amount.) 2.…
Exercise 14-7 (Algo) Net Present Value Analysis of Two Alternatives [LO14-2] Perit Industries has $115,000 to invest. The company is trying to decide between two alternative uses of the funds. The alternatives are: Project A Project B Cost of equipment required $ 115,000 $ 0 Working capital investment required $ 0 $ 115,000 Annual cash inflows $ 21,000 $ 69,000 Salvage value of equipment in six years $ 8,700 $ 0 Life of the project 6 years 6 years The working capital needed for project B will be released at the end of six years for investment elsewhere. Perit Industries’ discount rate is 15%. Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using tables. Required: 1. Compute the net present value of Project A. (Enter negative values with a minus sign. Round your final answer to the nearest whole dollar amount.) 2. Compute the net present value of Project B. (Enter negative values with a minus sign. Round your…
Exercise 14-7 (Algo) Net Present Value Analysis of Two Alternatives [LO14-2] Perit Industries has $210,000 to invest. The company is trying to decide between two alternative uses of the funds. The alternatives are: Cost of equipment required Working capital investment required Annual cash inflows Salvage value of equipment in six years Life of the project Project A $ 210,000 $0 $ 30,000 $ 9,100 6 years Project B $0 $ 210,000 $ 52,000 $0 6 years The working capital needed for project B will be released at the end of six years for investment elsewhere. Perit Industries' discount rate is 15%. Click here to view Exhibit 148-1 and Exhibit 148-2, to determine the appropriate discount factor(s) using tables. Required: . Compute the net present value of Project A. (Enter negative values with a minus sign. Round your final answer to the nearest whole dollar amount.) 2. Compute the net present value of Project B. (Enter negative values with a minus sign. Round your final answer to the nearest…
19 es TB MC Qu. 14-36 (Algo) Moates Corporation has... Moates Corporation has provided the following data concerning an investment project that it is considering: $ 190,000 $ 120,000 per year 4 years 9% Initial investment Annual cash flow Expected life of the project Discount rate Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using the tables provided. The net present value of the project is closest to: Note: Round your intermediate calculations and final answer to the nearest whole dollar amount. Multiple Choice $190,000 $198,680 $(70,000)
Exercise 12-14 (Algo) Comparison of Projects Using Net Present Value [LO12-2] Labeau Products, Limited, of Perth, Australia, has $15,000 to invest. The company is trying to decide between two alternative uses for the funds as follows: Invest in Project X Invest in Project Y Investment required $ 15,000 $ 15,000 Annual cash inflows $ 5,000 Single cash inflow at the end of 6 years $ 36,000 Life of the project 6 years 6 years The company’s discount rate is 16%. Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using tables. Required: 1. Compute the net present value of Project X. 2. Compute the net present value of Project Y. 3. Which project would you recommend the company accept?
Exercise 12-7 (Algo) Net Present Value Analysis of Two Alternatives [LO12-2] Perit Industries has $200,000 to invest. The company is trying to decide between two alternative uses of the funds. The alternatives are: Cost of equipment required Working capital investment required. Annual cash inflows Salvage value of equipment in six years Life of the project 1. Net present value project A 2. Net present value project B 3. Which investment alternative (if either) would you recommend that the company accept? Project A $ 200,000 $0 $ 29,000 $ 9,000
Exercise 14-14 (Algo) Comparison of Projects Using Net Present Value [LO14-2] Labeau Products, Limited, of Perth, Australia, has $21,000 to invest in one of the following two projects: Project Y $ 21,000 Investment required Annual cash inflows Single cash inflow at the end of 6 years Life of the project The company's discount rate is 18%. Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using tables. Required: 1. Compute the net present value of Project X. 2. Compute the net present value of Project Y. 3. Which project should the company accept? Project X Required 1 Required 2 Required 3 $ 21,000 $ 8,000 Complete this question by entering your answers in the tabs below. $ 50,000 6 years
Coffer Company is analyzing two potential investments. Cost of machine Project X $ 97,090 Net cash flow: Year 1 Year 2 Year 3 Year 4 Project Y $ 72,000 36,500 3,700 36,500 33,500 36,500 33,500 0 13,000 If the company is using the payback period method, and it requires a payback period of three years or less, which project(s) should be selected? Multiple Choice ○ Project Y. ○ Project X. Both X and Y are acceptable projects. Neither X nor Y is an acceptable project. Project Y because it has a lower Initial Investment.
Coffer Company is analyzing two potential investments. Project X Cost of machine Net cash flow: Year 1 Year 2 $ 85,470 Project Y $ 65,000 33,000 33,000 3,000 30,000 Year 3 Year 4 33,000 0 • 30,000 25,000 If the company is using the payback period méthod, and it requires a payback period of three years or less, which project(s) should be selected? Multiple Choice Project Y. Project X. Both X and Y are acceptable projects. Neither X nor Y is an acceptable project.
Porter Company is analyzing two potential investments Initial investment Net cash flow: Year 1 Year 2 Year 3 Year 4 Project X Project Y $ 75,900 $ 64,000 26,000 26,000 26,000 4,400 28,000 28,000 20,000 If the company is using the payback period method, and it requires a payback of three years or less, which project(s) should be selected? 0
Exercise 14A-1 (Algo) Basic Present Value Concepts [LO14-7] Annual cash inflows that will arise from two competing investment projects are given below: Year Investment A Investment B 1 $ 7,000 $ 10,000 2 8,000 9,000 3 9,000 8,000 4 10,000 7,000 $ 34,000 $ 34,000 The discount rate is 5%. Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using tables. Required: Compute the present value of the cash inflows for each investment.
Question 4 Bell Manufacturing is considering investing in a new project. Two projects have been put forward for consideration. The following information has been gathered for each. Project A Project B Initial investment £500,000 £600,000 Life of project 4 years 4 years Estimated annual cash flows: Year Project A Project B Cash flow per year 1 160,000 180,000 170,000 190,000 3 110,000 100,000 4 90,000 150,000 Resale value of project 30,000 40,000 The company estimates its cost of capital at 12% and uses straight line depreciation method for its plant and machinery. Required a) Appraise the two Project using the following methods of investment appraisal: i. Payback period ii. Accounting Rate of Return iii. Net present value b) Discuss your findings and advise the company which project they should invest in if the projects are mutually exclusive (that is only one project may be undertaken).