Turk Manufacturing uses the net present value method to make the decision, and it requires a 15% annual return on its investment
1 answer:
Answer:
E) Only Machine B is acceptable
Explanation:
The computation is shown below;
<u>For Machine A </u>
<u>Year Cash Flow PV Factor PV of Cash Flow </u>
0 -$9,000 1 -$9,000
1 $5,000 0.8696 $4,348
2 $4,000 0.761 $3,044
3 $2,000 0.6575 $1,315
NPV -$293
<u>Machine B </u>
<u>Year Cash Flow PV Factor PV of Cash Flow </u>
0 -$9000 1 -$9,000
1 $1,000 0.8696 $869.6
2 $2,000 0.761 $1,522
3 $11,000 0.6575 $7,232.5
NPV $624.1
As we can see that from the above calculations that the npv for machine A is in negative so the same should not be accepted but for machine the npv is in positive so the same should be accepted
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Answer:
A) Project A = 0.83 year
B) NPV of Project B = $14,609.66
C) Answer B
Explanation:
Requirement A
We know,
Payback period = Last year with negative cumulative cash flows + (Absolute value of last year's cumulative cash flow ÷ Cash flow of the following year's negative cumulative cash flow)
Or, Payback period = A + ( B ÷ C)
Project A Project B
Year Cash Flow Cumulative Cash Flow Cash Flow Cumulative Cash Flow
0 (A) -$10,000 -$10,000 (B) -$10,000 -$10,000 (B)
1 $12,000 (C) 2,000 $10,000(C) 0
2 8,000 10,000 6,000 6,000
3 6,000 16,000 16,000 22,000
Payback period for project A = 0 + ($10,000 ÷ 12,000) = 0 + 0.833 = 0.83 year
Payback period for project B = 0 + ($10,000 ÷ 10,000) = 0 + 1 = 1 year
X-treme Vitamin Company should choose project A because it can return the investment earlier than project B.
Requirement B
We can use excel to find the Net Present Value for both the projects with a cost of capital of 10%.
The following image shows the NPV for project A and B.
From the calculation of NPV, X-treme Vitamin Company should choose project B as that project yields more present cash flows.
Requirement C
A firm should generally have more confidence in answer b because money can produce more logical sense than a year. Yes, it is easy to understand how many years a company will need to get back its cash flow. Still, the present value of cash flows provides a more specific evaluation of how to utilize the initial investment.
Answer:
Follows are the solution to this question:
Explanation:
Its console shall be coordinated effort mutual funds which do not grow at all, and in every year they create a corrected degree of interest, that's why Its bond paying a fixed rate of the coupon but not maturing.
It's the price that the government needs to offer shareholders.