Question
Norwood, Inc., which has a hurdle rate of 14%, is considering three different independent investment opportunities. Each project has a seven-year life. The annual cash
Norwood, Inc., which has a hurdle rate of 14%, is considering three different independent investment opportunities. Each project has a seven-year life. The annual cash flows and initial investment for each of the projects are as follows: (Future Value of $1, Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1.) (Use appropriate factor from the PV tables.)
Project A | Project B | Project C | |||||||
Annual cash flows | $ | 131,620 | $ | 120,670 | $ | 109,710 | |||
Initial investment | 321,500 | 301,500 | 231,500 | ||||||
a. What is the present value of the annual cash flows for each of the three projects? (Round your answers to the nearest dollar amount.) Project A:
Project B:
Project C:
b. What is the net present value of each of the projects? (Round your intermediate calculations and final answers to the nearest dollar amount.)
Project A:
Project B:
Project C:
c. What is the profitability index of each of the projects? (Round the intermediate calculation to the nearest dollar amount. Round your answers to 2 decimal places.)
Project A:
Project B:
Project C:
d. In what order should Norwood prioritize investment in the projects?
A, B, C | |
C, A, B | |
B, A, C |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started