Question
Hello see attachment for better format. Thanks Accounts Problem. Two new software projects are proposed to a young, start-up company. The Alpha project will cost
Hello see attachment for better format. Thanks
Accounts Problem. Two new software projects are proposed to a young, start-up company. The Alpha project will cost $150,000 to develop and is expected to have annual net cash flow of $40,000. The Beta project will cost $200,000 to develop and is expected to have annual net cash flow of $50,000. The company is very concerned about their cash flow. Using the payback period, which project is better from a cash flow standpoint? Why? Accounts Problem. A five-year project has a projected net cash flow of $15,000, $25,000, $30,000, $20,000, and $15,000 in the next five years. It will cost $50,000 to implement the project. If the required rate of return is 20 percent, conduct a discounted cash flow calculation to determine the NPV. Accounts Problem. You work for the 3T company, which expects to earn at least 18 percent on its investments. You have to choose between two similar projects. Your analysts predict that inflation rate will be a stable 3 percent over the next 7 years. Below is the cash flow information for each project. Which of the two projects would you fund if the decision is based only on financial information? Why? Omega Alpha Year Inflow Outflow Netflow Year Inflow Outflow Netflow Y0 0 $225,000 -225,000 Y0 0 $300,000 -300,000 Y1 0 190,000 -190,000 Y1 $50,000 100,000 -50,000 Y2 $150,000 0 150,000 Y2 150,000 0 150,000 Y3 220,000 30,000 190,000 Y3 250,000 50,000 200,000 Y4 215,000 0 215,000 Y4 250,000 0 250,000 Y5 205,000 30,000 175,000 Y5 200,000 50,000 150,000 Y6 197,000 0 197,000 Y6 180,000 0 180,000 Y7 100,000 30,000 70,000 Y7 120,000 30,000 90,000 Total 1,087,000 505,000 582,000 Total 1,200,000 530,000 670,000
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