The management of Horizon Media Inc. is considering two capital investment projects. The estimated net cash flows
Question:
The management of Horizon Media Inc. is considering two capital investment projects. The estimated net cash flows from each project are as follows:
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The radio station requires an investment of $456,800, while the TV station requires an investment of $1,366,650. No residual value is expected from either project.
Instructions
1. Compute the following for each project:
a. The net present value. Use a rate of 10% and the present value of an annuity of $1 table appearing in this chapter.
b. A present value index. Round to two decimal places.
2. Determine the internal rate of return for each project by (a) computing a present value factor for an annuity of $1 and (b) using the present value of an annuity of $1 table appearing in this chapter.
3. What advantage does the internal rate of return method have over the net present value method in comparingprojects?
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Step by Step Answer:
1 a Radio Station Annual net cash flow at the end of each of 4 years 160000 Present value of an annu...View the full answer
Accounting
ISBN: 978-0324401844
22nd Edition
Authors: Carl S. Warren, James M. Reeve, Jonathan E. Duchac
