Question
Do you concur with the newly graduate's recommendation?Present a proper computation to support your answer. PROBLEMIV SBM Companyhas hired a consultant topropose a wayto increase
Do you concur with the newly graduate's recommendation?Present a proper computation to support your answer.
PROBLEMIV
SBM Companyhas hired a consultant topropose a wayto increase thecompany's revenues. The consultanthasevaluatedtwomutuallyexclusiveprojectswiththefollowinginformationprovided for each project:
| ProjectA | ProjectB | |
Capitalinvestment | $790,000 | $440,000 |
Annualcash flows | 130,000 | 75,000 |
Estimatedusefullife | 10years | 10years |
SBMCompanyusesadiscountrateof9%toevaluate both projects.
Requirements:(2pts.each)
- Calculatethenetpresentvalue (NPV)ofbothprojects.
- Calculatethepresentvalueindexforeachproject.
- WhichprojectshouldMobilaccept?
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Intermediate Accounting Volume 1
Authors: Thomas H. Beechy, Joan E. Conrod, Elizabeth Farrell, Ingrid McLeod Dick
7th Edition
1260306747, 978-1260306743
