Question
Phoenix Company can invest in each of three cheese-making projects: C1, C2, and C3. Each project requires an initial investment of $282,000 and would yield
Phoenix Company can invest in each of three cheese-making projects: C1, C2, and C3. Each project requires an initial investment of $282,000 and would yield the following annual cash flows. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.)
| C1 | C2 | C3 | ||||||||||
| Year 1 | $ | 30,000 | $ | 114,000 | $ | 198,000 | ||||||
| Year 2 | 126,000 | 114,000 | 78,000 | |||||||||
| Year 3 | 186,000 | 114,000 | 66,000 | |||||||||
| Totals | $ | 342,000 | $ | 342,000 | $ | 342,000 | ||||||
(1) Assume that the company requires a 9% return from its investments. Using net present value, determine which projects, if any, should be acquired. (Negative net present values should be indicated with a minus sign. Round your answers to the nearest whole dollar.)
Phoenix Company can invest in each of three cheese-making projects: C1, C2, and C3. Each project requires an initial investment of $282,000 and would yield the following annual cash flows. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.)
| C1 | C2 | C3 | ||||||||||
| Year 1 | $ | 30,000 | $ | 114,000 | $ | 198,000 | ||||||
| Year 2 | 126,000 | 114,000 | 78,000 | |||||||||
| Year 3 | 186,000 | 114,000 | 66,000 | |||||||||
| Totals | $ | 342,000 | $ | 342,000 | $ | 342,000 | ||||||
(1) Assume that the company requires a 9% return from its investments. Using net present value, determine which projects, if any, should be acquired. (Negative net present values should be indicated with a minus sign. Round your answers to the nearest whole dollar.)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered 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