Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Net Present Value Method, Internal Rate of Return Method, and Analysis The management of Quest Media Inc. is considering two capital investment projects. The estimated

image text in transcribed

image text in transcribed

image text in transcribed

Net Present Value Method, Internal Rate of Return Method, and Analysis The management of Quest Media Inc. is considering two capital investment projects. The estimated net cash flows from each project are as follows: Radio Station TV Station Year $200,000 $420,000 1 2 200,000 420,000 200,000 3 420,000 4 420,000 200,000 Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 1.833 1.736 1.690 1.626 1.528 2.402 3 2.673 2.487 2.283 2.106 2.589 4 3.465 3.170 3.037 2.855 5 4.212 3.791 3.605 3.352 2.991 6 4.917 4.355 4.111 3.784 3.326 5.582 3.605 7 4.868 4.564 4.160 6.210 5.335 4.968 4.487 3.837 9 6.802 5.759 5.328 4.772 4.031 7.360 10 6.145 5.650 5.019 4.192 co a st The radio station requires an investment of $517,800, while the TV station requires an investment f $1,199,100. No residual value is expected from either project. Required: 1a. Compute the net present value for each project. Use a rate of 10 % and the present value of an annuity f $1 in the table above required, use the minus sign to indicate a negative net present value. If required, round to the nearest whole dollar. TV Station Radio Station Present value of annual net cash flows Less amount to be invested Net present value 1b. Compute a present value index for each project. If required, round your answers to two decimal places. Present Value Index Radio Station TV Station 2. Determine the internal rate of return for each project by (a) computing a present value factor for an annuity of $1 and (b) usinga the present value of an annuity of $1 in the table above. If required. round your present value factor answers to three decimal places and internal rate of return to the nearest whole percent. Radio Station TV Station Present value factor for an annuity of $1 Internal rate of return 3. The net present value, present value index, and internal rate of return all indicate that the is a better financial opportunity compared to the although both investments meet the minimum return criterion of 10%

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Students also viewed these Accounting questions

Question

Please don't use excel and show step by step, I will upvote

Answered: 1 week ago