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Net Present Value A project has estimated annual net cash flows of $7,500 for six years and is estimated to cost $50,000. Assume a minimum acceptable rate of return of 20%. Use the Present Value of an Annuity of $1 at Compound Interest table below. Present Value of an Annuity of $1 at Compound Interest Year 6% 109 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 1.833 1.736 1.690 1.626 1.528 3 2.673 2.487 2.402 2.283 2.106 4 3.465 3.170 3.037 2.855 2.589 5 4.212 3.791 3.605 3.353 2.991 6 4.355 4.111 3.785 3.326 4.917 5.582 7 4.868 4.564 4.160 3.605 8 6.210 5.335 4.968 4.487 3.837 6.802 5.759 5.328 4.772 4.031 10 7.360 6.145 5.650 5.019 4.192 Determine (a) the net present value of the project and (b) the present value index. If required, use the minus sign to indicate a negative net present value. Net present value of the project (round to the nearest dollar) Present value index (rounded to two decimal places) Internal Rate of Return A project is estimated to cost $170,495 and provide annual net cash flows of $32,000 for nine years. Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 1.833 1.736 1.690 1.626 1.528 3 2.673 2.487 2.402 2.283 2.106 4 3.465 3.170 3.037 2.855 2.589 5 4.212 3.791 3.605 3.353 2.991 6 4.917 4.355 4.111 3.785 3.326 7 5.582 4.868 4.564 4.160 3.605 8 6.210 5.335 4.968 4.487 3.837 9 6.802 5.759 5.328 4.772 4.031 10 7.360 6.145 5.650 5.019 4.192 Determine the internal rate of retum for this project, using the Present Value of an Annuity of $1 at Compound Interest table shown above. % Net Present Value Method The following data are accumulated by Geddes Company in evaluating the purchase of s120,600 of equipment, having a four-year useful life: Net Income Net Cash Flow Year 1 540,000 $68,000 Year 2 Year 3 Year 4 24,000 52,000 12,000 39,000 (1,000) 27,000 Present Value of $1 at Compound Interest 6% 10% 12% 15% 20% 0.943 0.909 0.893 0.870 0.833 0.890 0.826 0.797 0.756 0.694 0.840 0.751 0.712 0.658 0.579 Year 1 2 3 4 0.683 0.636 0.572 0.482 0.792 0.747 5 0.621 0.567 0.497 0.402 6 0.705 0.564 0.507 0.432 0.335 0.279 7 0.665 0.513 0.452 0.376 8 0.627 0.467 0.404 0.327 0.233 9 0.592 0.424 0.361 0.284 0.194 10 0.558 0.386 0.322 0.247 0.162 a. Assuming that the desired rate of return is 20%, determine the net present value for the proposal. Use the table of the present value of $1 presented above. If required, round to the nearest dollar. Present value of net cash flow Amount to be invested S Net present value b. Would management be likely to look with favor on the proposal? because the net present value indicates that the return on the proposal is than the minimum desired rate of return of 20%. Yes No A project has estimated annual cash flows of $90,000 for 3 years and is estimated to cost $250,000. Assume a minimum acceptable rate of return of 10%. Present Value of $1 at Compound Interest Year 6% 1090 12% 1 0.943 0.890 2 0.893 0.797 0.712 3 0.909 0.826 0.751 0.683 0.621 0.840 0.792 0.747 4 0.636 0.567 5 Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 1 0.943 0.909 0.893 2 1.833 2.673 3.465 1.736 2.487 1.690 2.402 3 4 3.170 3.037 3.605 5 4.212 3.791 Use the tables above. a. Determine the net present value of the project. Enter negative values as negative numbers. b. Determine the present value index. Round your answer to two decimal places. Net Present Value A project has estimated annual net cash flows of $7,500 for six years and is estimated to cost $50,000. Assume a minimum acceptable rate of return of 20%. Use the Present Value of an Annuity of $1 at Compound Interest table below. Present Value of an Annuity of $1 at Compound Interest Year 6% 109 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 1.833 1.736 1.690 1.626 1.528 3 2.673 2.487 2.402 2.283 2.106 4 3.465 3.170 3.037 2.855 2.589 5 4.212 3.791 3.605 3.353 2.991 6 4.355 4.111 3.785 3.326 4.917 5.582 7 4.868 4.564 4.160 3.605 8 6.210 5.335 4.968 4.487 3.837 6.802 5.759 5.328 4.772 4.031 10 7.360 6.145 5.650 5.019 4.192 Determine (a) the net present value of the project and (b) the present value index. If required, use the minus sign to indicate a negative net present value. Net present value of the project (round to the nearest dollar) Present value index (rounded to two decimal places) Internal Rate of Return A project is estimated to cost $170,495 and provide annual net cash flows of $32,000 for nine years. Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 1.833 1.736 1.690 1.626 1.528 3 2.673 2.487 2.402 2.283 2.106 4 3.465 3.170 3.037 2.855 2.589 5 4.212 3.791 3.605 3.353 2.991 6 4.917 4.355 4.111 3.785 3.326 7 5.582 4.868 4.564 4.160 3.605 8 6.210 5.335 4.968 4.487 3.837 9 6.802 5.759 5.328 4.772 4.031 10 7.360 6.145 5.650 5.019 4.192 Determine the internal rate of retum for this project, using the Present Value of an Annuity of $1 at Compound Interest table shown above. % Net Present Value Method The following data are accumulated by Geddes Company in evaluating the purchase of s120,600 of equipment, having a four-year useful life: Net Income Net Cash Flow Year 1 540,000 $68,000 Year 2 Year 3 Year 4 24,000 52,000 12,000 39,000 (1,000) 27,000 Present Value of $1 at Compound Interest 6% 10% 12% 15% 20% 0.943 0.909 0.893 0.870 0.833 0.890 0.826 0.797 0.756 0.694 0.840 0.751 0.712 0.658 0.579 Year 1 2 3 4 0.683 0.636 0.572 0.482 0.792 0.747 5 0.621 0.567 0.497 0.402 6 0.705 0.564 0.507 0.432 0.335 0.279 7 0.665 0.513 0.452 0.376 8 0.627 0.467 0.404 0.327 0.233 9 0.592 0.424 0.361 0.284 0.194 10 0.558 0.386 0.322 0.247 0.162 a. Assuming that the desired rate of return is 20%, determine the net present value for the proposal. Use the table of the present value of $1 presented above. If required, round to the nearest dollar. Present value of net cash flow Amount to be invested S Net present value b. Would management be likely to look with favor on the proposal? because the net present value indicates that the return on the proposal is than the minimum desired rate of return of 20%. Yes No A project has estimated annual cash flows of $90,000 for 3 years and is estimated to cost $250,000. Assume a minimum acceptable rate of return of 10%. Present Value of $1 at Compound Interest Year 6% 1090 12% 1 0.943 0.890 2 0.893 0.797 0.712 3 0.909 0.826 0.751 0.683 0.621 0.840 0.792 0.747 4 0.636 0.567 5 Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 1 0.943 0.909 0.893 2 1.833 2.673 3.465 1.736 2.487 1.690 2.402 3 4 3.170 3.037 3.605 5 4.212 3.791 Use the tables above. a. Determine the net present value of the project. Enter negative values as negative numbers. b. Determine the present value index. Round your answer to two decimal places