Question
Blossoms Custom Construction Company is considering three new projects, each requiring an equipment investment of $24,640. Each project will last for 3 years and produce
Blossoms Custom Construction Company is considering three new projects, each requiring an equipment investment of $24,640. Each project will last for 3 years and produce the following net annual cash flows.
Year | AA | BB | CC | ||||
---|---|---|---|---|---|---|---|
1 | $7,840 | $11,200 | $14,560 | ||||
2 | 10,080 | 11,200 | 13,440 | ||||
3 | 13,440 | 11,200 | 12,320 | ||||
Total | $31,360 | $33,600 | $40,320 |
The equipments salvage value is zero, and Blossom uses straight-line depreciation. Blossom will not accept any project with a cash payback period over 2 years. Blossoms required rate of return is 12%. Click here to view PV table.
(a)
Compute each projects payback period. (Round answers to 2 decimal places, e.g. 15.25.)
AA | enter the number of years rounded to 2 decimal places | years | |
---|---|---|---|
BB | enter the number of years rounded to 2 decimal places | years | |
CC | enter the number of years rounded to 2 decimal places | years |
(b)
Compute the net present value of each project. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45). Round final answers to the nearest whole dollar, e.g. 5,275. For calculation purposes, use 5 decimal places as displayed in the factor table provided.)
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