Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Use the NPV method to determine whether Root Products should invest in the following projects: Project A: Costs $275,000 and offers seven annual net cash

image text in transcribed
image text in transcribed
image text in transcribed
Use the NPV method to determine whether Root Products should invest in the following projects: Project A: Costs $275,000 and offers seven annual net cash inflows of $54,000. Root Products requires an annual return of 14% on investments of this nature. Project B: Costs $380,000 and offers 10 annual net cash inflows of $77,000. Root Products demands an annual return of 12% on investments of this nature. (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 requirements Requirement 1. What is the NPV of each project? Assume noither project has a residual value. Round to two decimal places. (Enter any factor amounts to three decimal sign for a negative net present value.) Caclulate the NPV (not present value) of each project. Begin by calculating the NPV of Project A. Project A: Net Cash Annuity PV Factor Present Years Inflow (14%, n=7) Value 1.7 Present value of annuity 0 Investment Not present value of Project A Calculate the NPV of Project B. Project B: Years Net Cash Inflow Annuity PV Factor (1-12%, n=10) Present Value Choose from any list or enter any number in the input fields and then continue to the next question PIS 1 of 8 (0 complete . Use the NPV method to determine whether Root Products should invest in the following projects: Project A: Costs $275,000 and offers seven annual net cash inflows of $54,000. Root Products requires an annual return of 14% on investme Project B: Costs $380,000 and offers 10 annual net cash inflows of $77,000. Root Products demands an annual return of 12% on investment (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 requirements Calculate the NPV of Project B. Project B: Net Cash Annuity PV Factor Present Years Inflow (i=12%, n=10) Value 1 - 10 Present value of annuity 0 Investment Net present value of Project B Requirement 2. What is the maximum acceptable price to pay for each project? Maximum Acceptable Price Project A Project B -.- .-DAHALL ---- Choose from any list or enter any number in the input fields and then continue to the next question. . . Use the NPV method to determine whether Root Products should invest in the following projects: Project A: Costs $275,000 and offers seven annual net cash inflows of $54,000. Root Products requires an annual return of 14% on investments of this na Project B: Costs $380,000 and offers 10 annual net cash inflows of $77,000. Root Products demands an annual return of 12% on investments of this natu (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 requirements Net present value of Project B Requirement 2. What is the maximum acceptable price to pay for each project? Maximum Acceptable Price Project A Project B Requirement 3. What is the profitability index of each project? (Round to two decimal places, X.XX.) Select the formula, then enter the amounts to calculate the profitability index of each project. Profitability Index Project A Project B Choose from any list or enter any number in the input fields and then continue to the next

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

Fraud Auditing And Forensic Accounting

Authors: Tommie W. Singleton, Aaron J. Singleton, G. Jack Bologna, Robert J. Lindquist

3rd Edition

0471785911, 978-0471785910

More Books

Students also viewed these Accounting questions

Question

b. Why were these values considered important?

Answered: 1 week ago