Question
xercise 25-14 Computation and interpretation of net present value and internal rate of return LO P3, P4 Phoenix Company can invest in each of three
xercise 25-14 Computation and interpretation of net present value and internal rate of return LO P3, P4
Phoenix Company can invest in each of three cheese-making projects: C1, C2, and C3. Each project requires an initial investment of $276,000 and would yield the following annual cash flows. (PV of $1, FV of $1, PVA of $1 and FVA of $1) (Use appropriate factor(s) from the tables provided.)
| C1 | C2 | C3 | ||||||||||
| Year 1 | $ | 28,000 | $ | 112,000 | $ | 196,000 | ||||||
| Year 2 | 124,000 | 112,000 | 76,000 | |||||||||
| Year 3 | 184,000 | 112,000 | 64,000 | |||||||||
| Totals | $ | 336,000 | $ | 336,000 | $ | 336,000 | ||||||
(1) Assuming that the company requires a 9% return from its investments, use net present value to determine which projects, if any, should be acquired. (Round your answers to the nearest whole dollar.)
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