Refer to the information in Exercise 26-12. Create an Excel spreadsheet to compute the internal rate of
Question:
Refer to the information in Exercise 26-12. Create an Excel spreadsheet to compute the internal rate of return for each of the projects.
Data From Exercise 26-12
Following is information on two alternative investments. Beachside Resort is considering building a new pool or spa. The company requires a 10% return from its investments. For each investment project, compute
(a) Net present value and
(b) Profitability index.
(c) If the company can only select one project, which should it choose on the basis of profitability index?
Pool Spa Initial investment.... $(160,000) $(105,000) Net cash flows: Year 1 40,000 32,000 Year 2 56,000 50,000 Year 3 80,295 66,000 Year 4 90,400 72,000 ..... Year 5 65,000 24,000
Step by Step Answer:
ANSWER a To calculate the net present value NPV and profitability index PI we need to first determin...View the full answer
Related Video
Internal rate of return is a method of calculating an investment’s rate of return. The term internal refers to the fact that the calculation excludes external factors, such as the risk-free rate, inflation, the cost of capital, or financial risk.
Students also viewed these Business questions
-
Compute the internal rate of return for each of the following projects, each of which requires an initial investment of $100,000 and provides the periodic cash flows indicated. a. $23,098 per period...
-
Refer to the information in Exercise 6-7. Ending inventory consists of 45 units from the March 14 purchase, 75 units from the July 30 purchase, and all 100 units from the October 26 purchase. Using...
-
Refer to the information in Exercise 17-16. Suppose Bio Doc determines standard costs of $6.60 per equivalent unit for direct materials and $10.40 per equivalent unit for conversion costs for both...
-
Consider the following grooves, each of width W, that have been machined from a solid block of material. (a) For each case obtain an expression for the view factor of the groove with respect to the...
-
A farmer runs a heat pump with a motor of 2 kW. It should keep a chicken hatchery at 30oC which loses energy at a rate of 0.5 kW per degree difference to the colder ambient. The heat pump has a...
-
Brandy Pitts Winery requested that you determine whether the companys ability to pay its current liabilities and long-term debts improved or deteriorated during 2010. To answer this question, compute...
-
The 2014 financial statements of LVMH Moet Hennessey-Louis Vuitton S.A. are presented in Appendix C at the end of this book. LVMH is a Paris-based holding company and one of the worlds largest and...
-
At the start of its scal year on October 1, Fox County reported the following (all dollar amounts in thousands): Fund balance: Committed for encumbrances . $200 Unassigned ......... 400 Total fund...
-
You've worked out a line of credit arrangement that allows you to borrow up to $75 million at any time. The interest rate is 0.51 percent per month. In addition, 3 percent of the amount that you...
-
For each of the five leverscapacity, inventory, time, information, and priceidentify an example where a supply chain has focused on this lever to deal with uncertainty. In each case, identify reasons...
-
Perez Co. is considering an investment of $27,336 that provides net cash flows of $9,000 annually for four years. (a) What is the internal rate of return of this investment? (b) The hurdle rate is...
-
Refer to the information in Exercise 26-10. (a) Create an Excel spreadsheet to compute the internal rate of return for each of the projects. (b) Based on internal rate of return, determine whether...
-
In 2003, 550,000 acres of farmland in California were devoted to growing almonds. By 2012, the number of acres used to grow almonds had increased to 810,000. Find the average rate of change in the...
-
As a senior analyst in ABC Asset Management you have evaluated the performance of two stocks Finsolve plc and Gamma Plc. You have gathered the following information Risk free rate is 5% The expected...
-
Other Information: Bonds Payable: On December 31, 20X1, the Corp. issued 1,000, 6% bonds with a 20-year maturity. The bonds pay interest every six months (June 30 and December 31), and the market...
-
Imagine if you were appointed a judge, but the paperwork had not been delivered to you yet which paperwork was the final stage of the appointment process. You believe that because there was a change...
-
If you require a 25% return, what is maximum you should pay for the following investment? You buy a vending machine that will pay you the following cash flows: Year 1:$500 Year 2:$1,000 Year 3:$1,500...
-
Question 1 Liquid Hair's demand for bottles of shampoo was 10,500 units. The CEO asked the accountant about the expected cost for the sales-order activity. A new software had been installed, and the...
-
Stratton, Ltd. manufactures shirts, which it sells to customers for embroidering with various slogans and emblems. The standard cost card for the shirts is as follows. Sandy Robison, operations...
-
Prove that the mean heat capacities C P H and C P S are inherently positive, whether T > T 0 or T < T 0 . Explain why they are well defined for T = T 0 .
-
Label each item a through h below as a feature of either a job order or process operation. a. Routine, repetitive procedures b. Custom orders c. Low production volume d. Heterogeneous products and...
-
Label each item a through h below as a feature of either a job order or process operation. a. Routine, repetitive procedures b. Custom orders c. Low production volume d. Heterogeneous products and...
-
Edison Company manufactures wool blankets and accounts for product costs using process costing. The following information is available regarding its May inventories. The following additional...
-
Please show all work and explain. Answers are given. 5 8 . TNK , Inc. is expected to have earnings next year of $ 2 per share, and it employs a plowback ratio of 3 0 % . TNK s capitalization rate is...
-
EShack sells a model of Creative Labs blue-tooth adapter for $35 and expect to sell it for foreseeable future. Given their clout with the manufacturer, they are able to procure it at a price of...
-
Suppose your firm has decided to use a divisional WACC approach to analyze projects. The firm currently has four divisions, A through D , with average betas for each division of 0 . 5 , 1 0 , 1 3 ,...
Study smarter with the SolutionInn App