Question
Ivanhoes Custom Construction Company is considering three new projects, each requiring an equipment investment of $22,880. Each project will last for 3 years and produce
Ivanhoes Custom Construction Company is considering three new projects, each requiring an equipment investment of $22,880. Each project will last for 3 years and produce the following net annual cash flows.
Year | AA | BB | CC | ||||
---|---|---|---|---|---|---|---|
1 | $7,280 | $10,400 | $13,520 | ||||
2 | 9,360 | 10,400 | 12,480 | ||||
3 | 12,480 | 10,400 | 11,440 | ||||
Total | $29,120 | $31,200 | $37,440 |
The equipments salvage value is zero, and Ivanhoe uses straight-line depreciation. Ivanhoe will not accept any project with a cash payback period over 2 years. Ivanhoes required rate of return is 12%. Click here to view PV table.
(b) Compute the net present value of each project. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45). Round final answers to the nearest whole dollar, e.g. 5,275. For calculation purposes, use 5 decimal places as displayed in the factor table provided.)
AA | enter a dollar amount rounded to 0 decimal places | ||
---|---|---|---|
BB | enter a dollar amount rounded to 0 decimal places | ||
CC | enter a dollar amount rounded to 0 decimal places |
Which is the most desirable project based on net present value?
The most desirable project based on net present value is select a project Project AAProject BBProject CC. |
Which is the least desirable project based on net present value?
The least desirable project based on net present value is select a project Project AAProject CCProject BB. |
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