4 ! Part 2 of 2 Required information Use the following information for the Quick Study below. (The following information applies to the questions displayed below. Project A requires a $405,000 initial investment for new machinery with a five-year life and a salvage value of $49,500. The company uses straight-line depreciation. Project A is expected to yield annual net income of $29,000 per year for the next five years. 1.25 points eBook QS 25-6 Accounting rate of return LO P2 Hint Compute Project A's accounting rate of return. Print Accounting Rate of Return Choose Denominator: Choose Numerator: 1 = Accounting Rate of Return Accounting rate of return 0 5 Required information 1.25 points Use the following information for the Quick Study below. [The following information applies to the questions displayed below.] Peng Company is considering an investment expected to generate an average net income after taxes of $2,800 for three years. The investment costs $46,500 and has an estimated $10,200 salvage value. eBook QS 25-8 Net present value LO P3 Hint Print Assume Peng requires a 10% return on its investments. Compute the net present value of this investment. Assume the company uses straight-line depreciation. (PV of $1, FV of $1. PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided. Negative amounts should be indicated by a minus sign.) Select Chart Amount x PV Factor Present Value Cash Flow Annual cash flow Residual value Net present value 6 ! Required information Part 1 of 2 Use the following information for the Quick Study below. [The following information applies to the questions displayed below.] 1.25 points Following is information on an investment considered by Hudson Co. The investment has zero salvage value. The company requires a 9% return from its investments. Initial investment Expected net cash flows in year: Investment A1 $(370,000) eBook 100,000 130,000 123,000 10 Hint Print QS 25-11 Net present value LO P3 Compute this investment's net present value. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided. Round all present value factors to 4 decimal places.) Cash Flow Present Value of 1 at 9% Present Value Year 1 Year 2 Year 3 Totals Amount invested Net present value 7 Part 2 of 2 Required information Use the following information for the Quick Study below. [The following information applies to the questions displayed below.] 1.25 points Following is information on an investment considered by Hudson Co. The investment has zero salvage value. The company requires a 9% return from its investments. Investment A1 $(370,000) Initial investment Expected net cash flows in year: eBook 2 3 100,000 130,000 123,000 dot Hint Print QS 25-12 Net present value, with salvage value LO P3 Assume that instead of a zero salvage value, as shown above, the investment has a salvage value of $29,000. Compute the investment's net present value. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided. Round all present value factors to 4 decimal places.) Cash Flow Present Value of 1 at 9% Present Value Year 1 Year 2 Year 3 Totals Amount invested Net present value 00 8 Exercise 25-10 NPV and profitability Index LO P3 125 points Following is Information on two alternative Investments being considered by Jolee Company. The company requires a 12% return from Its Investments. (PV of $1, FV of $1, PVA of $1 and FVA of $1. (Use appropriate factor(s) from the tables provided.) Initial investment Expected net cash flows in year: 1 eBook Project A Project B $(188,325) $(147,968) 40,000 35,eee 50,000 57,600 87,295 61,eee 96,482 69, eee 68,000 32,600 2 2 Hint Pre a. For each alternative project compute the net present value. b. For each alternative project compute the profitability Index, if the company can only select one project, which should it choose? Complete this question by entering your answers in the tabs below. Required A Required B For each alternative project compute the net present value. Project A Initial Investment $ 180,325 Chart Values are Based on: Cash Inflow X PV Factor = Present Value | | | Year 1 1 2 2 3 4 5 Initial Investment Year Cash Inflow Project E $ $ 147,980 X PV Factor Present Value 1 2 3. = L = 4 4 5 =