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Ob The management of Style Networks Inc. is considering two TV show projects. The estimated tet PR 26-4B Net present value method, internal rate of
Ob The management of Style Networks Inc. is considering two TV show projects. The estimated tet PR 26-4B Net present value method, internal rate of return method, and analysis for a service company fter Hours, $100,800 cash flows from each project are as follows: Year After Hours Sun Fun $320,000 $290,000 2 320,000 290,000 3 320,000 290,000 4 320,000 290,000 1 After Hours requires an investment of $913,600, while Sun Fun requires an investment of $880,730. No residual value is expected from either project. Chapter 26 Capital Investment Analysis 1349 Instructions 1. Compute the following for each project: a. The net present value. Use a rate of 10% and the present value of an annuity table appearing in Exhibit 5 of this chapter. b. A present value index. Round to two decimal places. 2. Determine the internal rate of return for each project by (a) computing a present value factor for an annuity of $1 and (b) using the present value of an annuity of $1 table appearing in Exhibit 5 of this chapter What advantage does the internal rate of return method have over the net present value method in comparing projects? 3
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