Question

Marigold Company is considering two different, mutually
exclusive capital expenditure proposals. Project A will cost
$464,000, has an expected useful life of 12 years, a salvage value
of zero, and is expected to increase net annual cash flows by
$68,100. Project B will cost $342,000, has an expected useful life
of 12 years, a salvage value of zero, and is expected to increase
net annual cash flows by $50,900. A discount rate of 8% is
appropriate for both projects. Click here to view PV table.

Compute the net present value and profitability index of each
project. *(**If the net present
value is negative, use either a negative sign preceding the number
eg -45 or parentheses eg (45). Round present value answers to 0
decimal places, e.g. 125 and profitability index answers to 2
decimal places, e.g. 15.25. For calculation purposes, use 5 decimal
places as displayed in the factor table
provided.)*

Net present value - Project A | $ | ||

Profitability index - Project A | |||

Net present value - Project B | $ | ||

Profitability index - Project B |

Which project should be accepted based on Net Present
Value?

Project A Project B should be accepted. |

Which project should be accepted based on profitability
index?

Project B Project A should be accepted. |

Answer #1

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of zero, and is expected to increase net annual cash flows by $
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of 11 years, a salvage value of zero, and is expected to increase
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appropriate for both projects. Click...

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Project Bono
Project Edge
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$190,750
$214,000
Annual net income:
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15,260
19,620
29,430
2
15,260
18,530
25,070
3
15,260
17,440
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15,260
13,080
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Original cost
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