Question

X-treme Vitamin Company is considering two investments, both of which cost $42,000. The cash flows are as follows:

Year | Project A | Project B | ||||

1 | $ | 44,000 | $ | 42,000 | ||

2 | 15,000 | 14,000 | ||||

3 | 15,000 | 20,000 | ||||

Use Appendix B for an approximate answer but calculate your
final answer using the formula and financial calculator
methods.

**a-1.** Calculate the payback period for Project A
and Project B. **(Round your answers to 2 decimal
places.)
**

**a-2.** Which of the two projects should be chosen
based on the payback method?

Project A | |

Project B |

**b-1.** Calculate the net present value for
Project A and Project B. Assume a cost of capital of 8 percent.
**(Do not round intermediate calculations and round your
final answers to 2 decimal places.)
**

**b-2.** Which of the two projects should be chosen
based on the net present value method?

Project B | |

Project A |

**c.** Should a firm normally have more confidence in
the payback method or the net present value method?

Payback method | |

Net present value method |

Answer #1

X-treme Vitamin Company is considering two investments, both of
which cost $47,000. The cash flows are as follows:
Year
Project A
Project B
1
$
50,000
$
47,000
2
20,000
19,000
3
18,000
25,000
Use Appendix B for an approximate answer but calculate your
final answer using the formula and financial calculator
methods.
a-1. Calculate the payback period for Project A
and Project B. (Round your answers to 2 decimal
places.)
a-2. Which of the two projects should be...

Keller Construction is considering two new investments. Project
E calls for the purchase of earthmoving equipment. Project H
represents an investment in a hydraulic lift. Keller wishes to use
a net present value profile in comparing the projects. The
investment and cash flow patterns are as follows: Use Appendix B
for an approximate answer but calculate your final answer using the
formula and financial calculator methods.
Project E
Project H
($41,000 Investment)
($42,000 Investment)
Year
Cash Flow
Year
Cash...

Keller Construction is considering two new investments. Project
E calls for the purchase of earthmoving equipment. Project H
represents an investment in a hydraulic lift. Keller wishes to use
a net present value profile in comparing the projects. The
investment and cash flow patterns are as follows: Use Appendix B
for an approximate answer but calculate your final answer using the
formula and financial calculator methods.
Project E
Project H
($22,000 Investment)
($21,000 Investment)
Year
Cash Flow
Year
Cash Flow...

Keller Construction is considering two new investments. Project
E calls for the purchase of earthmoving equipment. Project H
represents an investment in a hydraulic lift. Keller wishes to use
a net present value profile in comparing the projects. The
investment and cash flow patterns are as follows: Use Appendix B
for an approximate answer but calculate your final answer using the
formula and financial calculator methods. Project E Project H
($35,000 Investment) ($37,000 Investment) Year Cash Flow Year Cash
Flow...

Keller Construction is considering two new investments. Project
E calls for the purchase of earthmoving equipment. Project H
represents an investment in a hydraulic lift. Keller wishes to use
a net present value profile in comparing the projects. The
investment and cash flow patterns are as follows: Use Appendix B
for an approximate answer but calculate your final answer using the
formula and financial calculator methods.
Project E Project H
($35,000 investment) ($37,000 investment)
Year Cash Flow Year Cash Flow...

Keller Construction is considering two new investments. Project
E calls for the purchase of earthmoving equipment. Project H
represents an investment in a hydraulic lift. Keller wishes to use
a net present value profile in comparing the projects. The
investment and cash flow patterns are as follows: Use Appendix B
for an approximate answer but calculate your final answer using the
formula and financial calculator methods.
Project E
Project H
($49,000 Investment)
($46,000 Investment)
Year
Cash Flow
Year
Cash Flow...

Keller Construction is considering two new investments. Project
E calls for the purchase of earthmoving equipment. Project H
represents an investment in a hydraulic lift. Keller wishes to use
a net present value profile in comparing the projects. The
investment and cash flow patterns are as follows: Use Appendix B
for an approximate answer but calculate your final answer using the
formula and financial calculator methods.
Project E
Project H
($46,000 Investment)
($45,000 Investment)
Year
Cash Flow
Year
Cash Flow...

Davis Chili Company is considering an investment of $37,000,
which produces the following inflows:
Year
Cash Flow
1
$
17,000
2
16,000
3
13,000
Use Appendix B for an approximate answer but calculate your
final answer using the formula and financial calculator
methods.
a.
Determine the net present value of the project based on a zero
percent discount rate.
Net present
value
$
b.
Determine the net present value of the project based on a 10
percent...

Davis Chili Company is
considering an investment of $65,000, which produces the following
inflows:
Year
Cash Flow
1
$
29,000
2
28,000
3
25,000
Use Appendix B for an
approximate answer but calculate your final answer using the
formula and financial calculator methods.
a. Determine the net present value of the project
based on a zero percent discount rate.
b.
Determine the net present value of the project based on a 11
percent discount rate. (Do not round intermediate
calculations...

Cummings Products Company is considering two mutually exclusive
investments whose expected net cash flows are as follows: EXPECTED
NET CASH FLOWS Year Project A Project B 0 -$320 -$360 1 -387 134 2
-193 134 3 -100 134 4 600 134 5 600 134 6 850 134 7 -180 134 What
is each project's IRR? Do not round intermediate calculations.
Round your answers to two decimal places Calculate the two
projects' NPVs, if you were told that each project's cost...

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