Question
Phoenix Company can invest in each of three cheese-making projects: C1, C2, and C3. Each project requires an initial investment of $288,000 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 $288,000 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. Negative amounts should be indicated by a minus sign.)
C1 | C2 | C3 | ||||||||||
Year 1 | $ | 32,000 | $ | 116,000 | $ | 200,000 | ||||||
Year 2 | 128,000 | 116,000 | 80,000 | |||||||||
Year 3 | 188,000 | 116,000 | 68,000 | |||||||||
|
|
|
|
|
| |||||||
Totals | $ | 348,000 | $ | 348,000 | $ | 348,000 | ||||||
|
|
|
|
|
| |||||||
(1) Assuming that the company requires a 9% return from its investments, use net present value to determine which projects, if any, should be acquired. (Round your answers to the nearest whole dollar.)
|
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