- Exercise 11 18 Algo Net Present Value Unequal Cash Flows And Internal Rate Of Return Lo P3 P4 Phoenix Company Is Co 1 (33.41 KiB) Viewed 43 times
Exercise 11-18 (Algo) Net present value, unequal cash flows, and internal rate of return LO P3, P4 Phoenix
Company is considering investments in projects C1 and C2. Both require an initial investment of $324,000 and would yield the following annual net cash flows. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Net cash flows Year 1 Project C1 $ 44,000 140,000 200,000 Project C2 $ 128,000 128,000 128,000 Year 2 Year 3 Totals $ 384,000 $ 384,000 a. The
company requires a 8% return from its investments. Compute net present values using factors from Table B.1 in Appendix B to determine which projects, if any, should be accepted. b. Using the answer from part a, is the internal rate of return higher or lower than 8% for (i) Project C1 and (ii) Project C2? Hint: It is not necessary to compute IRR to answer this
question. Complete this
question by entering your answers in the tabs below.
Complete this
question by entering your answers in the tabs below. Required A Required B The
company requires a 8% return from its investments. Compute net present values using factors from Table B.1 in Appendix B to determine which projects, if any, should be accepted. (Negative net present values should be indicated with a minus sign. Round your present value factor to 4 decimals. Round your answers to the nearest whole dollar.) Present Value of Project C1 Net Cash Flows x Present Value of 1 at 8% Net Cash Flows Year 1 Year 2 Year 3 $ 0 Project C2 Net Cash Flows Present Value of Net Cash Flows Year 1 Year 2 Year 3 Totals $ 0 Initial investment Net present value Which projects, if any, should be accepted Totals X Present Value of 1 at 8% < Required A II = || = Required B >