Your company's cost of capital was determined to be 12 percent. Several investment alternatives are being considered,
Question:
Your company's cost of capital was determined to be 12 percent. Several investment alternatives are being considered, and the discounted cash flows have given the following results:
Net present value:
1. A new machine was analyzed, and a net present value of zero resulted.
2. A new product line was analyzed, and a negative net present value of $\$ 60$ resulted.
3. An investment was being considered. The analysis yielded a net present value of $\$ 250$.
Internal rate of return:
1. A plant expansion project promised a yield of 12 perccit.
2. An investment in additional transport trucks would yield an internal rate of return of 10 percent.
3. The addition of another assembly line would add cash flows that would give an internal rate of return of 16 percent.
Determine which projects should be accepted as investment opportunities and which should be rejected.
Step by Step Answer:
Survey Of Accounting
ISBN: 9780538846172
1st Edition
Authors: James D. Stice, W. Steve Albrecht, Earl Kay Stice, K. Fred Skousen