Question
Assume that a company is considering a capital investment project with a four-year time horizon and the following cash flows: Cost of new equipment $
-
Assume that a company is considering a capital investment project with a four-year time horizon and the following cash flows:
Cost of new equipment
$
190,000
Working capital required
$
50,000
Annual net cash inflows
$
100,000
Maintenance and repairs in third year
$
40,000
Salvage value of equipment in fourth year
$
30,000
Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using the tables provided. Assuming the companys required rate of return is 17%, the profitability index of the project is closest to:
1.17.
1.21.
1.33.
1.22.
Assume that a company is considering a capital investment project with a four-year time horizon and the following cash flows:
|
|
|
|
|
| Cost of new equipment | $ | 190,000 |
|
| Working capital required | $ | 50,000 |
|
| Annual net cash inflows | $ | 100,000 |
|
| Maintenance and repairs in third year | $ | 40,000 |
|
| Salvage value of equipment in fourth year | $ | 30,000 |
|
Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using the tables provided. Assuming the companys required rate of return is 17%, the profitability index of the project is closest to:
| 1.17. | ||
| 1.21. | ||
| 1.33. | ||
| 1.22. |
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Intermediate Accounting
Authors: J. David Spiceland, James Sepe, Mark Nelson
6th edition
978-0077400163
