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pogonyaev
2 years ago
15

You are considering the following two mutually exclusive projects. The crossover point is _____ and Project _____ should be acce

pted if the discount rate is 14%.
a. 12.79%; B
b. 15.96%; A
c. 15.96%; B
d. 13.28%; B
e. 13.28%; A
Project A
Year 0 -$21,000
Year 1 $7,000
Year 2 $7,000
Year 3 $15,000
Project B
Year 0 -$21,000
Year 1 $15,000
Year 2 $5,000
Year 3 $7,000
Business
1 answer:
Romashka [77]2 years ago
3 0

Answer:

13.28%; B

Explanation:

Project A                                 Project B                          Differential

Year 0 -$21,000                     Year 0 -$21,000               0

Year 1 $7,000                         Year 1 $15,000                -$8,000

Year 2 $7,000                        Year 2 $5,000                 $2,000

Year 3 $15,000                       Year 3 $7,000                $8,000

the discount rate = 14%, the NPV is:

NPV project A = -21,000 + 7,000/1.14 + 7,000/1.14² + 15,000/1.14³ = $651

NPV project B = -21,000 + 15,000/1.14 + 5,000/1.14² + 7,000/1.14³ = $730

if the discount rate is 14%, project B should be accepted (higher NPV)

the crossover rate is the discount rate where both NPVs are equal.

we must find the IRR using an excel spreadsheet and the IRR function:

=IRR (0,-8000,2000,8000) = 13.28%

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6 0
2 years ago
A delivery truck costing $25,000 is expected to have a $1,500 salvage value at the end of its useful life of four years or 125,0
Helga [31]

Answer:

a.

Depreciation expense year 2 Straight line = $5875

b.

Depreciation expense year 2 Double declining = $6250

c.

Depreciation expense year 2 units of activity = $5264

Explanation:

a.

Straight line method is a depreciation method that charges a constant depreciation expense through out the useful life of the asset. Straight line depreciation per year is,

Straight line depreciation = (Cost - Salvage value) / Estimated useful life

Straight line depreciation = (25000 - 1500) / 4    =  $5875 per year

Straight line rate = 100% / 4 = 25%

b.

Double declining balance is an accelerated method of depreciation that charges more depreciation in the initial years and less in later years. Double declining balance depreciation is calculated as follows,

Depreciation expense = 2 * Straight line rate * Book value at start of the period

Depreciation expense year 1 = 2 * 0.25 * 25000     = $12500

Book value at start of year 2 = 25000 - 12500 = $12500

Depreciation year 2 = 2 * 0.25 * 12500  =  $6250

c.

The units of production method charges depreciation based on the activity for which asset is used as a proportion of the estimated useful life in terms of activity.

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7 0
2 years ago
Why does a country need good constitution ​
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Answer:

<em>The Constitution contains the most important rules of our political system. It protects the rights of the people inside the country, and it explains their obligations. </em>

hope it helps u

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8 0
3 years ago
Fly-By-Night Insurance Company had much larger losses than forecast. The company did not charge adequate premiums nor did the co
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Explanation:

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This type of funds are basically covering the beneficiaries of the insurance organization in which the insurer are basically helps in selling the various types of products and the services in the market.

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Therefore, Option (A) is correct answer.    

7 0
3 years ago
The production department is proposing the purchase of an automatic insertion machine. They have identified 3 machines and have
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Answer: Machine B

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Machine A

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<em>Machine B has best average rate of return. </em>

8 0
2 years ago
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