Screening Function Your companys cost of capital was determined to be 12%. Several investment alternatives are being
Question:
Screening Function Your company’s cost of capital was determined to be 12%. Several investment alternatives are being considered, and the discounted cash flows have given the following results:
Net present value:
1.. A new machine was analyzed, and a net present value of zero resulted.
2.. A new product line was analyzed, and a negative net present value of $60 resulted.
3.. An investment was being considered. The analysis yielded a net present value of $250.
Internal rate of return:
1.. A plant expansion project promised a yield of 12%.
2.. An investment in additional transport trucks would yield an internal rate of return of 10%.
3.. The addition of another assembly line would add cash flows that would give an internal rate of return of 16%.
Determine which projects should be accepted as investment opportunities and which should be rejected.
Step by Step Answer:
Accounting Concepts And Applications
ISBN: 9780324376159
10th Edition
Authors: W. Steve Albrecht, James D. Stice, Earl K. Stice, Monte R. Swain