Question
Book Exercise Capital Budgeting The U3 Company is considering three long-term capital investment proposals. Each investment has a useful life of 5 years. Relevant data
Book Exercise Capital Budgeting
The U3 Company is considering three long-term capital investment proposals. Each investment has a useful life of 5 years. Relevant data on each project are as follows:
| Project A Investment | -275,000 |
|
| Year 1 | $40,000 |
|
| Year 2 | 56,000 |
|
| Year 3 | 80,295 |
|
| Year 4 | 90,400 |
|
| Year 5 | 55,000 |
|
| Year 6 | 50,000 |
|
| Year 7 | 45,000 |
|
| Year 8 | 32,000 |
|
| Project B Investment | -275,000 |
|
| Year 1 | $72,000 |
|
| Year 2 | 50,000 |
|
| Year 3 | 66,000 |
|
| Year 4 | 72,000 |
|
| Year 5 | 29,000 |
|
| Year 6 | 35,000 |
|
| Year 7 | 22,000 |
|
| Year 8 | 36,000 |
|
| Project C Investment | -275,000 |
|
| Year 1 | $82,000 |
|
| Year 2 | 75,000 |
|
| Year 3 | 65,000 |
|
| Year 4 | 55,000 |
|
| Year 5 | 45,000 |
|
| Year 6 | 35,000 |
|
| Year 7 | 25,000 |
|
| Year 8 | 15,000 |
|
Required:
1. Compute the Net Present Value for each project using the following present value interest factors:
(0.9091 0.8264 0.7513 0.6830 0.6209 0.5644 0.5131 0.4664)
2. Select the best investment (mutually exclusive events)
Answer
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Financial Accounting
Authors: Bev Vickerstaff, Parminder Johal
1st Edition
1444170414, 978-1444170412
