MANAGERIAL ACCOUNTING F/MGRS.
6th Edition
ISBN: 9781264100590
Author: Noreen
Publisher: RENT MCG
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Chapter 7A, Problem 7A.1E
To determine
Concept Introduction:
The
the present value of cash inflows for each investment.
Expert Solution & Answer
Answer to Problem 7A.1E
The present value of cash inflows for each investment is as follows:
Investment A =$ 18,519
Investment B =$ 21,832
Explanation of Solution
The present value of cash inflows for each investment is calculated as follows:
| Investment A | Investment B | |||||
| PVF (18%) | PV | Cash inflow | PV | |||
| A | B | C=A*B | D | E=A*D | ||
| Year 1 | 0.84746 | $ 3,000 | $ 2,542 | $ 12,000 | $ 10,169 | |
| Year 2 | 0.71818 | $ 6,000 | $ 4,309 | $ 9,000 | $ 6,464 | |
| Year 3 | 0.60863 | $ 9,000 | $ 5,478 | $ 6,000 | $ 3,652 | |
| Year 4 | 0.51579 | $ 12,000 | $ 6,189 | $ 3,000 | $ 1,547 | |
| Present value of cash inflow | $ 18,519 | $ 21,832 | ||||
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Students have asked these similar questions
You are asked to evaluate an investment project with the following cash flows:
Year
1
234.
2
4
Cash Flow
$800
1,090
1,350
1,475
a. If the discount rate is 7 percent, what is the present value of these cash flows? (Do
not round intermediate calculations and round your answer to 2 decimal places,
e.g., 32.16.)
b. What is the present value at 17 percent? (Do not round intermediate calculations
and round your answer to 2 decimal places, e.g., 32.16.)
c. What is the present value at 25 percent? (Do not round intermediate calculations
and round your answer to 2 decimal places, e.g., 32.16.)
a. Present value at 7%
b. Present value at 17%
c. Present value at 25%
$
3,926.98
The following information regarding an investment project is available.
Discount rate
7%
Year
Cash Flow
0
(£125,000)
1
£60,000
2
£50,000
3
£10,000
4
£10,000
5
£50,000
A). What is the Net Present Value of the Project?
Choose one from the following:
A.
£56,076
B.
£43,670
C.
£125,000
D.
£26,188
Annual cash inflows from two competing investment opportunities aregiven. Each investment opportunity will require the same initial investment.Year AInvestmentB123$10,00013,000$39,00016,000$13,000$13,00013,000$39,000Requirement1. Assuming a 12% interest rate, which investment opportunity would you choose?
Chapter 7A Solutions
MANAGERIAL ACCOUNTING F/MGRS.
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