1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
Sergio039 [100]
2 years ago
9

Daisy's Creamery Inc. is considering one of two investment options. Option 1 is a $75,000 investment in new blending equipment t

hat is expected to produce equal annual cash flows of $19,000 for each of seven years. Option 2 is a $90,000 investment in a new computer system that is expected to produce equal annual cash flows of $27,000 for each of five years. The residual value of the blending equipment at the end of the fifth year is estimated to be $15,000. The computer system has no expected residual value at the end of the fifth year.
Present Value of $1 at Compound Interest

Year 6% 10% 12% 15% 20%
1 0.943 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 0.432 0.335
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%
1 0.943 0.909 0.893 0.870 0.833
2 1.833 1.736 1.690 1.626 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 3.352 2.991
6 4.917 4.355 4.111 3.784 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

Required:
a. Determine the net present values of the two projects.
b. Determine the present value indices of the two projects.
Business
1 answer:
Savatey [412]2 years ago
5 0

Answer:

Missing part of question assumes minimum rate of return of 10%.

Use 5 years for both investments for comparison.

a. Net Present Value of Project 1

Present value of $19,000 annually over 5 years at 10% = 19,000 * 3.791

= $72,029

Present value of $15,000 residual value at 5th year at 10% = 15,000 * 0.621

= $9,315

Net Present value = 72,029 + 9,315 - 75,000

= $6,344

Net Present Value of Project 2

Present value of $27,000 over 5 years, 10% = 27,000 * 3.791

= $‭102,357‬

Net Present Value = ‭102,357‬ - 90,000

= $12,357

b. Present value indices

= Present value of cash inflows/ investments

Project 1                                                                      Project 2

= (72,029 + 9,315) / 75,000                                         = 102,357 / 90,000

= 1.08                                                                            = 1.14

You might be interested in
According to liquidity preference theory investment spending would rise if the price level
ANTONII [103]

Answer:

A.rose making the interest rate fall

Explanation:

According to the liquidity preference theory developed by John Keynes, if the money supply rises, price level also rises, interest rate falls. If interest rate falls, the price of bond rises which would increase capital gains. People would prefer to hold bonds instead of money, therefore, investment spending would rise.

The liquidity preference theory states that we hold money for transactive, speculative and precautionary motives.

4 0
3 years ago
Monetarists believe that changes in the supply of money Question 24 options: do not affect aggregate demand. affect aggregate de
s344n2d4d5 [400]

Answer: affect aggregate demand directly.

Explanation:

Monetarists believe that money supply is very important in determining the economic growth of an economy and this is why they advocate for monetary authorities to get involved in the monetary system in order to guide the growth of the economy.

To monetarists, the supply of money influences consumption as well as investment and so directly affects aggregate demand because both consumption and investment are components of aggregate demand. For instance, an increase in money supply increases both consumption and investment and so increases aggregate demand.

5 0
3 years ago
During January 2017 General Fund supplies ordered in the previous fiscal year and encumbered at an estimated amount of $2,000 we
Norma-Jean [14]

Answer:

The correct answer is:

Expenditures—2017 in the amount of $200. (C.)

Explanation:

This scenario describes a record that was less than the actual amount spent on the General Fund supplies. The amount recorded was $2,000, meanwhile the actual amount spent was $2,000. This entails that an amount worth $200 was not recorded, hence it will be debited as expenditures, but the question now is where the debit will be recorded?

This review was done in January 2017, meaning that the income statement for the 2016 Fiscal year must have been balanced, hence the amount will be an expenditure recorded in 2017, but the particulars will have a description that it was a carried over expenditure from 2016. Therefore $200 will be debited from 2017 as expenditures.

5 0
2 years ago
Consumers' incomes decrease, which causes a decrease in demand. This causes the equilibrium price to _____. increase decrease st
adell [148]
The answer is decrease 
6 0
3 years ago
Read 2 more answers
If the U.S. dollar appreciates, an MNC's: a. exports denominated in foreign currencies will probably increase. b. U.S. sales wil
Hoochie [10]

Most likely when the U.S. dollar appreciates, the MNC's interest owed on foreign funds borrowed will probably increase.

MNC refers to Multinational corporation .

  • The Multinational corporation are known to borrow from foreign bodies in dollars.

  • Hence, when the dollar appreciates, the amount owed to the foreign bodies will increase consequently.

Therefore, the Option C is correct because the MNC's interest owed on foreign funds borrowed will probably increase when U.S. Dollars appreciates.

Read more about this here

<em>brainly.com/question/14124450</em>

4 0
2 years ago
Other questions:
  • | 50 POINTS | How Is Open End Credit Different From Closed End Credit ? NO GOOGLE ANSWERS ! Provide Advantages And Disadvantages
    8·2 answers
  • Threadless allows customers to submit their own designs and to vote on which designs they would like to see printed on a T-shirt
    6·1 answer
  • Which of the following is NOT a type of funded retention?a: reservesB: self-insurancec: captivesd. credite: all of the above
    7·1 answer
  • e Company incurs cost of $35.70 per unit, of which?19.94 is variable, to make a product that normally sells for $58.16. A foreig
    6·1 answer
  • CHEGG The adjusted trial balance of Bramble Corporation at December 31, 2022 includes the following accounts: Retained Earnings
    15·1 answer
  • The electronic version of the owner guide contains the same information that is found in the paper owner guide that is placed in
    7·1 answer
  • At Polar Sportswear, orders have significantly exceeded projections, and Chris, the operations director, has decided to hire for
    15·1 answer
  • The Gardner Company, a client of your firm, has come to you with the following problem. It has three clerical employees who must
    8·1 answer
  • Predetermined Overhead Rate, Overhead Variances, Journal Entries Craig Company uses a predetermined overhead rate to assign over
    8·1 answer
  • The communication process begins with a(n) ______, the person who ______ a message.
    12·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!