1) Wicander Company is considering investing in a project that will cost $152,000 and have no salvage value at the end of its 5-year life. It is estimated that the project will generate annual cash inflows of $40,000 each year. The company has a hurdle or cutoff rate of return of 8%.

Instructions

a. Using the internal rate of return method calculate an approximate interest yield for the project. (Use tables from below ).

b. Should this project be accepted by Wicander and why?

2) Rodriguez Company has money available for investment and is considering two projects each costing $17,500. Each project has a useful life of 3 years and no salvage value. The investment cash flows follow

Instructions

a) Using the net present value method (hint: use discount factors), compute the net present value for each project if 8% is an acceptable earnings rate. (Use tables below)

b) Which project should be selected? Explain your answer