account questions

Search References Mailings Review View Help Q1. The net present value has been computed for Proposals P and Q. Relevant data are as follows: Proposal P Proposal Q Amount to be invested $265,000 $450,000 Total present value of net cash flow 296,500 425,000 Net present value 21,500 (20,000) Determine the present value index for each proposal. ANS: Proposal P: Proposal Q:Q2. Proposals A and B each cost $500,000 and have 5-year lives. Proposal A is expected to provide equal annual net cash flows of $109,000, while the net cash flows for Proposal B are as follows: Year 1 $150,000 Year 2 140,000 Year 3 110,000 Year 4 50,000 Year 5 50,000 $500,000 Determine the cash payback period for each proposal. ANS: Proposal A: Proposal B: FocusRajveer K Design Layout References Mailings Review View Help Q3. A $400,000 capital investment proposal has an estimated life of 4 years and no residual value. The estimated net cash flows are as follows: Year Net Cash Flow Year Net Cash Flow 1 $200,000 3 $90,000 2 150,000 80,000 The minimum desired rate of return for net present value analysis is 12%. The present value of $1 at compound interest of 12% for 1, 2, 3, and 4 years is .893, .797, .712, and .636, respectively. Determine the net present value. ANS: Present Value Net Present Value of Year at 12% Cash Flow Net Cash Flow 2 4 Total Amount to be invested Net present value FocusQ4. A 6-year project is estimated to cost $350,000 and have no residual value. If the straight-line amortization method is used and estimated total net income is $126,000, determine the average rate of return. ANS: FOCUS O Ei W 19 144 110 th