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Adams Modems, Inc. (AMI) has several capital investment opportunities. The term, expected annual cash inflows, and the cost of each opportunity are outlined in the
Adams Modems, Inc. (AMI) has several capital investment opportunities. The term, expected annual cash inflows, and the cost of each opportunity are outlined in the following table. AMI has established a desired rate of return of 10 percent for these investment opportunities. (PV of $1 and PVA of $1) (Use appropriate factor(s) from the tables provided.) Opportunity Investment term Expected cash inflow Cost of investment A 4 years $ 3,800 $10,100 B 5 years $4,100 $12,300 C 3 years $4,200 $10,500 D 5 years $ 5,300 $20,200 Required a. Compute the net present value of each investment opportunity and record your answers in the following table. The results for Investment Opportunity A have been recorded in the table as an example. b. Determine the net present value and the internal rate of return for each investment opportunity. Record the results in the following table. The results for investment Opportunity A have been recorded in the following table as an example. Note that the manual computation yields the same net present value amounts as the financial function routines of Excel or a financial calculator. Complete this question by entering your answers in the tabs below. Required A Required B Compute the net present value of each investment opportunity and record your answers in the following table. The results for Investment Opportunity A have been recorded in the table as an example. (Negative amounts should indicated by minus sign. Round "Present value factor" to 6 decimal places. Round "Present value of cash flows and Net present value to 2 decimal places.) B C D $ 4,100 $ 4,200 $ 5,300 Opportunity Cash inflow Times present value factor Present value of cash flows Minus cost of investment Net present value $ 3 $ A 3,800 .169865 12,045.49 (10,100.00) 1,945.49 (12,300.00) (10,500.00) (20,200.00) $ Required A Required B Determine the net present value and the internal rate of return for each investment opportunity. Record the results in the following table. The results for investment Opportunity A have been recorded in the following table as an example. Note that the manual computation yields the same net present value amounts as the financial function routines of Excel or a financial calculator. (Negative amounts should indicated by minus sign. Round your answers to 2 decimal places.) Show less A B D Opportunity Net present value Internal rate of return A $ 1945.49 18.62 %
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