Question
Walton Modems, Inc. (WMI) has several capital investment opportunities. The term, expected annual cash inflows, and the cost of each opportunity are outlined in the
Walton Modems, Inc. (WMI) has several capital investment opportunities. The term, expected annual cash inflows, and the cost of each opportunity are outlined in the following table. WMI has established a desired rate of return of 16 percent for these investment opportunities. (PV of $1 and PVA of $1) (Use appropriate factor(s) from the tables provided.)
Opportunity | A | B | C | D | ||||||||
Investment term | 4 years | 5 years | 3 years | 5 years | ||||||||
Expected cash inflow | $ | 3,900 | $ | 4,600 | $ | 6,400 | $ | 3,300 | ||||
Cost of investment | $ | 10,400 | $ | 13,800 | $ | 14,400 | $ | 10,900 | ||||
Required
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Compute the net present value of each investment opportunity and record your answers in the following table. The results for Investment Opportunity A have been recorded in the table as an example.
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Determine the net present value and the internal rate of return for each investment opportunity. Record the results in the following table. The results for investment Opportunity A have been recorded in the following table as an example. Note that the manual computation yields the same net present value amounts as the financial function routines of Excel or a financial calculator.
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