Exercise 24-14 Computing and interpreting net present value and internal rate of return LO P3, P4

Phoenix Company can invest in each of three cheese-making projects: C1, C2, and C3. Each project requires an initial investment of $240,000 and would yield the following annual cash flows. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.)

	C1				C2				C3
Year 1		$	16,000			$	100,000			$	184,000
Year 2			112,000				100,000				64,000
Year 3			172,000				100,000				52,000
Totals		$	300,000			$	300,000			$	300,000

1. Assume that the company requires a 10% return from its investments. Using net present value, determine which projects, if any, should be acquired. 2. Using the answer from part 1, is the internal rate of return higher or lower than 10% for Project C2?

Required Required 1 2 Assume that the company requires a 10% return from its investments. Using net present value, determine which projects, if any, should be acquired. (Negative net present values should be indicated with a minus sign. Round your present value factor to 4 decimals. Round your answers to the nearest whole dollar.) Project C1 Initial Investment Chart Values are Based on: % Cash PV Year Inflow Factor 1 2 3 Present Value Project C2 Initial Investment Cash PV Inflow Factor 1 2 Year Present Value 3 = Project C3 Initial Investment Cash PV Year Inflow Factor 1 2 3 Present Value