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
Supervisors counting cash receipts daily is an example of:.
netineya [11]

Answer:

Independent internal verification

Explanation:

3 0
2 years ago
The benefits or reviewing procedures for ordering products and services
Doss [256]

Answer:

They provide more detail and utility than a basic expense record. ...

They're the foundation of a reliable purchasing process. ...

They improve organisation for multiple projects and processes. ...

They provide clear and highly detailed levels of communication to all parties.

Explanation:

5 0
2 years ago
Where are americans from
sergejj [24]

Answer:

America

Explanation:

7 0
2 years ago
Read 2 more answers
An FHA-insured loan in the amount of $157,500 at 5.5% for 30 years closed on July 17. The first monthly payment is due on Septem
uranmaximum [27]

Answer:

the amount of the interest adjustment is $336.875

Explanation:

The computation of the amount of the interest adjustment is as follows;

= Principal × rate of interest × number of days ÷ total number of days

= $157,500 × 5.5% × 14 days ÷ 360 days

= $336.875

Hence, the amount of the interest adjustment is $336.875

Therefore the given formula is applied

6 0
3 years ago
To retain its edge in the organic health food market, Natura has established a high-priority team comprised of senior executives
polet [3.4K]

Answer:

Cross-functional

Explanation:

It is a team composed of people with different skills necessary to complete the work.

A cross-functional device is one that:

   As a whole it is self-sufficient.

   He has the knowledge and skills necessary to build the part of the product that corresponds to him.

   Each member's specialty can be complemented by some other team member.

In a multifunctional development team, speed and productivity are triggered because, not depending so much on other people to do the job, request information, resources or requests from different managers, much time is saved in the process.

5 0
3 years ago
Other questions:
  • The most preferred technique for determining how much life insurance coverage is needed for an individual is:
    13·1 answer
  • A firm expects to sell 25,900 units of its product at $7 per unit. Pretax income is predicted to be $60,900. If the variable cos
    8·1 answer
  • g Which of the following is a good reason to invest in convertible​ bonds? A. They often have higher than normal coupon rates. B
    8·1 answer
  • Why is it important to compute real GDP?
    6·1 answer
  • In what circumstances is it most important to use multistage dividend discount models rather than constant-growth models?
    12·1 answer
  • Observations of violations of consumer optimum predicted by consumer choice theory could provide support for   I. utility analys
    7·1 answer
  • Pablo Company has budgeted production for next year as follows:QuarterFirst Second Third FourthProduction in units 48,000 88,000
    12·1 answer
  • 1
    13·1 answer
  • A monetary stimulus is designed to shift the
    8·1 answer
  • According to the PMQ Pizza Magazine, an estimate of pizza sales in the United States for the top 100 pizza companies was $44.3 b
    12·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!