Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Phoenix Company is considering investments in projects C1 and C2. Both require an initial investment of $234,000 and would yield the following annual net cash

image text in transcribed
image text in transcribed
image text in transcribed
Phoenix Company is considering investments in projects C1 and C2. Both require an initial investment of $234,000 and would yield the following annual net cash flows. (PV of $1. FV of $1. PVA of S1, and FVA of S1) (Use appropriate factor(s) from the tables provided.) Net cash flows Project 1 Project 2 Year 1 $ 14,000 $ 98,000 Year 2 110,000 98,000 Year 3 170,000 98,000 Totals $ 294,000 $ 294,000 a. The company requires a 10% return from its investments. Compute net present volues using factors from Table 8.1 in Appendix Bto determine which projects, if any, should be accepted. b. Using the answer from part a, is the internal rate of return higher or lower than 10% for () Project Ct and Project C2? Hint: It is not necessary to compute IRR to answer this question Complete this question by entering your answers in the tabs below. Required A Required B The company requires a 10% return from its investments. Compute net present values using factors from Table B.1 in Appendix B to determine which projects, if any, should be accepted. (Negative net present values should be indicated with a minus sign. Round your present value factor to 4 decimals. Round your answers to the nearest whole dollar) Present Value Project C1 Net Cash Flow Present Value of Net Cash of 1 at 10% Flows Year 1 $ 14,000 0.9091 - $ 12,727 Year 2 110,000 0.8265 90,910 Year 3 170,000 0.7513 127.721 Totals $ 294,000 $ 231,358 Present value of cash inflows 231,360 Project C2 Net Cash Flows Present Value of 1 at 10% # Present Value of Net Cash Flows Year 1 Year 2 Year 3 Totals $ 0 Which projects, if any, should be accepted Complete this question by entering your answers in the tabs below. Required A Required B Using the answer from part a, is the internal rate of return higher or lower than 10% for (1) Project C1 and (II) Project C2? Hint: It is not necessary to compute IRR to answer this question. Is the internal rate of return higher or lower than 10% for Project C1? () is the internal rate of return higher or lower than 10% for Project C2

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

Recommended Textbook for

Crime And Punishment In The Future Internet

Authors: Sanja Milivojevic

1st Edition

036746800X, 978-0367468002

More Books

Students also viewed these Finance questions

Question

3. What do you think? Are these sales letters convincing?

Answered: 1 week ago