. Project 2 has a computed net present value of $26,300 over a 4-year life. Project 1 could be sold at the end of 4 years for a price of $82,000. Use the Present Value of $1 at Compound Interest and the Present Value of an Annuity of $1 at Compound Interest tables shown below. Present Value of $1 at Compound Interest Year 6% 10% 12% 15% 20% 10.943 0.909 0.893 0.870 0.833 2 0.890 0.826 0.797 0.756 0.694 3 0.840 0.751 0.712 0.658 0.579 4 0.792 0.683 0.636 0.572 0.482 5 0.747 0.621 0.567 0.497 0.402 6 0.705 0.564 0.507 0.43 20.335 7 0.665 0.513 0.452 0.376 0.279 8 0 627 0.467 0.404 0.327 0.233.9 0.592 0.424 0:361 0.284 0.194 10 0.558 0.386 0.322 0.247 0.162 Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 10.943 0.909 0.893 0.870 0.833 2 1833 1736 1.690 1626 1.528 3 2,673 2.487 2.402 2 283 2.106 4 3.465 3.170 3.037 2.855 2.589 5 4.212 3.791 3.605 3.353 2 991 6 4.917 4.355 4 111 3.785 3.326 7 5 582 4,868 4 564 4 160 3.605 8 6.210 5 335 4.968 4,487 3. 837 9 6.802 5.759 5.328 4.772 4.031 10 7.360 6.145 5.650 5.019 4 192 a. Determine the net present value of Project 1 over a 4-year life with residual value, assuming a minimum rate of return of 6%. If required, round to the nearest dollar. $ b. Which project provides the greatest net present val

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter12: Capital Investment Analysis

Section: Chapter Questions

Problem 3BE

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Project 1 requires an original investment of $96,300. The project will yield cash flows of $16,000 per year for 6 years. Project 2 has a computed net present value of $26,300 over a 4-year life. Project 1 could be sold at the end of 4 years for a price of $82,000. Use the Present Value of $1 at Compound Interest and the Present Value of an Annuity of $1 at Compound Interest tables shown below. Present Value of $1 at Compound Interest Year 6% 10% 12% 15% 20% 10.943 0.909 0.893 0.870 0.833 2 0.890 0.826 0.797 0.756 0.694 3 0.840 0.751 0.712 0.658 0.579 4 0.792 0.683 0.636 0.572 0.482 5 0.747 0.621 0.567 0.497 0.402 6 0.705 0.564 0.507 0.43 20.335 7 0.665 0.513 0.452 0.376 0.279 8 0 627 0.467 0.404 0.327 0.233.9 0.592 0.424 0:361 0.284 0.194 10 0.558 0.386 0.322 0.247 0.162 Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 10.943 0.909 0.893 0.870 0.833 2 1833 1736 1.690 1626 1.528 3 2,673 2.487 2.402 2 283 2.106 4 3.465 3.170 3.037 2.855 2.589 5 4.212 3.791 3.605 3.353 2 991 6 4.917 4.355 4 111 3.785 3.326 7 5 582 4,868 4 564 4 160 3.605 8 6.210 5 335 4.968 4,487 3. 837 9 6.802 5.759 5.328 4.772 4.031 10 7.360 6.145 5.650 5.019 4 192 a. Determine the net present value of Project

1 over a 4-year life with residual value, assuming a minimum rate of return of 6%. If required, round to the

nearest dollar. $ b. Which project provides the greatest net present value?

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