Dwight Donovan, the president of Rundle Enterprises, is considering two investment opportunities. Because of limited resources,...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Dwight Donovan, the president of Rundle Enterprises, is considering two investment opportunities. Because of limited resources, he will be able to invest in only one of them. Project A is to purchase a machine that will enable factory automation; the machine is expected to have a useful life of five years and no salvage value. Project B supports a training program that will improve the skills of employees operating the current equipment. Initial cash expenditures for Project A are $119,000 and for Project B are $33,000. The annual expected cash inflows are $29,023 for Project A and $8,705 for Project B. Both investments are expected to provide cash flow benefits for the next five years. Rundle Enterprises' desired rate of return is 4 percent. (PV of $1 and PVA of $1) (Use appropriate factor(s) from the tables provided.) Required a. Compute the net present value of each project. Which project should be adopted based on the net present value approach? b. Compute the approximate internal rate of return of each project. Which one should be adopted based on the internal rate of return approach? Complete this question by entering your answers in the tabs below. Required A Required B Compute the net present value of each project. Which project should be adopted based on the net present value approach? (Round your final answers to 2 decimal places.) Project A Project B Which project should be adopted? Net Present Value < Required A Required B > Required A Required B Compute the approximate internal rate of return of each project. Which one should be adopted based on the internal rate of return approach? Project A Project B Which project should be adopted? Internal Rate of Return % % Dwight Donovan, the president of Rundle Enterprises, is considering two investment opportunities. Because of limited resources, he will be able to invest in only one of them. Project A is to purchase a machine that will enable factory automation; the machine is expected to have a useful life of five years and no salvage value. Project B supports a training program that will improve the skills of employees operating the current equipment. Initial cash expenditures for Project A are $119,000 and for Project B are $33,000. The annual expected cash inflows are $29,023 for Project A and $8,705 for Project B. Both investments are expected to provide cash flow benefits for the next five years. Rundle Enterprises' desired rate of return is 4 percent. (PV of $1 and PVA of $1) (Use appropriate factor(s) from the tables provided.) Required a. Compute the net present value of each project. Which project should be adopted based on the net present value approach? b. Compute the approximate internal rate of return of each project. Which one should be adopted based on the internal rate of return approach? Complete this question by entering your answers in the tabs below. Required A Required B Compute the net present value of each project. Which project should be adopted based on the net present value approach? (Round your final answers to 2 decimal places.) Project A Project B Which project should be adopted? Net Present Value < Required A Required B > Required A Required B Compute the approximate internal rate of return of each project. Which one should be adopted based on the internal rate of return approach? Project A Project B Which project should be adopted? Internal Rate of Return % %
Expert Answer:
Answer rating: 100% (QA)
To compute the net present value NPV for each project we need to use the form... View the full answer
Related Book For
Fundamental Managerial Accounting Concepts
ISBN: 978-1259569197
8th edition
Authors: Thomas Edmonds, Christopher Edmonds, Bor Yi Tsay, Philip Olds
Posted Date:
Students also viewed these accounting questions
-
Which of the following sequences are bounded (and divergent), in- creasing, or convergent? G == J = n 1 in H = 45 x 8", I = K = - (+)* 2nm 2-1 n+1 L = cos
-
In Chapter 9 we will be able to show, under certain assumptions, that the velocity v(t) of a falling raindrop at time t is where t is the acceleration due to gravity and is the terminal velocity of...
-
The probabilities that three drivers will be able to drive home safely after drinking are 0.5, 0.25, and 0.2, respectively. If they set out to drive home after drinking at a party, what is the...
-
Cindy Bagnal, the manager of Cayce Printing Service, has provided you with the following aging schedule for Cayce's accounts receivable: Cindy indicates that the $126,700 of accounts receivable...
-
Every annual report of a public company includes an extensive discussion and analysis provided by the company's management. Specifically, which aspects of the company must this discussion address?...
-
High Seas Cruise Lines, Inc., reported the following income statement for the year ended December 31, 2006. Millions Operating revenues ..............................................................
-
Repeat Problem 15.D27, but bulb 2 at \(\mathrm{z}=\delta\) contains \(\mathrm{y}_{\mathrm{air}}=0.610, \mathrm{y}_{\mathrm{H} 2}=0.010\), and \(\mathrm{y}_{\mathrm{NH} 3}=0.380\). Problem 15.D27 This...
-
Computerized Accounting SystemDepartmental Budgetary Comparison Report. Review the computer generated budgetary comparison report presented below for the Lincoln City Parks and Recreation Department...
-
Exercise 2 4 - 6 ( Algo ) Payback period, equal cash flows, and accounting rate of return LO P 1 , P 2 B 2 B Company is considering the purchase of equipment that would allow the company to add a new...
-
Ms. Plant decided to purchase shares in Schvantz Ltd., a public company. She purchased 800 shares at $25 per share plus brokerage of $690 on May 24, 1998. The following additional transactions took...
-
Imagine that you work for the search engine, Google. Due to government regulations, you will now be charging customers/the public for all Google searches. Alphabet (parent company of Google), has...
-
A is an administrative arrangement used by financial institutions that quarantines information within one part of the institution and prevents information possessed by persons in one part of the...
-
1. A distillation column is separating methane, ethane, propane, and butane. We pick methane and propane as the keys. This means that ethane is a distributed non-key or "sandwich" component. a. Show...
-
A parallel plate capacitor, when filled with a dielectric material (x = 3.7) between its plates, has a capacitance of 3.05 pF. The capacitor is initially charged to a certain potential difference AV,...
-
Consider the second order homogeneous differential equation given by dy - 4 dy+4y=0 dx dx . Solve this differential equation using the method of separation of variables.
-
What was observed in the magnetic field after the addition of another magnetic field in the Helmholtz set-up? Based on your model, what happens to the magnetic field as the distance between the two...
-
Cash flows from two investment opportunities are given below. Year CFA CFB 0 -$1,000 -$1,000 1 +$100+$800 2 +$200+$300 3 +$400+$300 4 +$700+$200 5 +$800+$200 If the cost of capital is 10%, what is...
-
Which of the following streaming TV devices does not involve use of a remote controller? A) Google Chromecast B) Apple TV C) Amazon Fire TV D) Roku
-
budget director for Kanosh Cleaning Services prepared the following list of expected selling and administrative expenses. All expenses requiring cash payments are paid for in the month incurred...
-
The following accounts and corresponding balances were drawn from Jogger Company's 2017 and 2016 year-end balance sheets: Account Title 2017 2016 Accounts receivable..............................
-
Kemp Tables, Inc. (KTI) makes picnic tables of 2 4 planks of treated pine. It sells the tables to large retail discount stores such as Walmart. After reviewing the following data generated by KTI's...
-
Match the concept listed in items 1 through 6 with the most appropriate description listed in items a through \(f\). Description Concept 1. Enterprise Resource Planning (ERP) a. system 2. Brands of...
-
Indicate which type of data analytics, 1 through 4, is described in each of the following statements, a through \(h\). Data Analytics 1. Descriptive analytics 2. Diagnostic analytics 3. Predictive...
-
Match each item in the value chain, 1 through 7 , with an impact of an artificial intelligence initiative, choosing from items a through g. Value Chain 1. Research and development 2. Design 3. Supply...
Study smarter with the SolutionInn App