Question;E26-19 Using payback;to make capital investment decisions 5.4;yrs;Robinson Hardware is adding a new product line that will;require an investment;of $1,454,000. Managers estimate that this investment will;have a 10-year life and;generate net cash inflows of $300,000 the first year;$270,000 the second year;and $260,000 each year thereafter for eight years. Compute;the payback period.;E26-20 Using ARR to;make capital investments decisions 16.45%;Refer to the Robinson Hardware information in Exercise;E26-19. Assume the;project has no residual value. Compute the ARR for the;investment. Round to;two places.;E26-21 Using the time;value of money 2.;$124,656;Janice wants to take the next five years off work to travel;around the world. She;estimates her annual cash needs at $28,000 (if she needs;more, she will work odd;jobs). Janice believes she can invest her savings at 8%;until she depletes her funds.;1. How much money does Janice need now to fund her travels?;2. After speaking with a number of banks, Janice learns she;will only be able to;invest her funds at 4%. How much does she need now to fund;her travels?;E26-24 Using NPV and;profitability index to make capital investment decisions 1. Project B $16,200 NPV;Use the NPV method to determine whether Kyler Products;should invest in the;following projects;Project A: Costs $260,000 and offers seven annual net cash;inflows of $57,000.;Kyler Products requires an annual return of 16% on;investments of this nature.;Project B: Costs $375,000 and offers 10 annual net cash;inflows of $75,000.;Kyler Products demands an annual return of 14% on;investments of this nature.;Requirements;1. What is the NPV of each project? Assume neither project;has a residual value.;Round to two decimal places.;2. What is the maximum acceptable price to pay for each;project?;3. What is the profitability index of each project? Round to;two decimal places.;E26-25 Using IRR to;make capital investment decisions Project;A 12% ? 14% IRR;Refer to the data regarding Kyler Products in Exercise;E26-24. Compute the IRR;of each project and use this information to identify the;better investment.;P26-38 Using payback;ARR, NPV, and IRR to make capital investment decisions;This problem continues the Davis Consulting, Inc. situation;from Problem P25-34;of Chapter 25. Davis Consulting is considering purchasing;two different types of;servers. Server A will generate net cash inflows of $25,000;per year and have a zero;residual value. Server A?s estimated useful life is three;years and it costs $40,000.;Server B will generate net cash inflows of $25,000 in year;1, $11,000 in year 2;and $4,000 in year 3. Server B has a $4,000 residual value;and an estimated life of;three years. Server B also costs $40,000. Davis?s required;rate of return is 14%.;Requirements;1. Calculate payback, accounting rate of return, net present;value, and internal;rate of return for both server investments. Use Microsoft;Excel to calculate NPV;and IRR.;2. Assuming capital rationing applies, which server should;Davis invest in?
Paper#38775 | Written in 18-Jul-2015Price : $28