Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Use the NPV method to determine whether Root Products should invest in the following projects: - Project A Costs $295,000 and oflers elight annual net
Use the NPV method to determine whether Root Products should invest in the following projects: - Project A Costs $295,000 and oflers elight annual net cash hilows of $57,000. Reot Products requires an annual retum of 12% on investments of this nature. - Project B. Costs $385,000 and offers 9 annual net cash infloss of $75.000. Root Products demands an annual roture of 10%5 on investments of this nature (Click the icon to view Present Value of $1 table.) (Click the icon to vew Prasent Value of Ordinary Annuity of 51 table.) Road the rooutrements: Requirement 1. What is the NDV of each project? Assume neither proinct has a sasidual value. Round to two decimai places (Enter any factor arnounte fo three docimal places, XXXCK: Use parentheses or a minus shign for a negative net present vave ) Cachulate the NPV (net present yalue) of each project. Begin br calculating the NPV of Project A - Project A. Costs $295,000 and offers oight annual net cash inflows of $57,000. Root Products requires an annual retum of 12% on investments of - Project B. Costs $385,000 and offers 9 annual net cash inflows of $75,000. Root Products demands an annual return of 10% on investments of this (Click the icon to view Present Value of $1 table) (Click the icon to view Present Value of Ordinary Annuity of $1 table.) Read the requir Requirements 1. What is the NPV of each project? Assume neither project has a residual value. Round to two decimal places. Requirement 1 2. What is the maximum acceptable price to pay for each project? 3. What is the profitablility index of each project? Round to two decimal places. Present Value of $1 Reference Present Value of Ordinary Annuity of $1
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