You have two investments that have positive net present values and are financially feasible. Your boss...
You have two investments that have positive net present values and are financially feasible. Your boss wants you to make a recommendation on which one of the two to invest in given different useful lives? How do you account for this/make the decision?
Homework Answers
NPV decision rule says that if the NPV is positive, the project should be taken.
When there are two projects with unequal lives having positive NPV, Equivalent cash flow approach should be used to make the decision. It gives the equivalent NPV per year, which will make both the projects comparable.
It is calculated as NPV/PVAF(r%, n years)
The project with higher Equivalent annuity should be accepted
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You have two investments that have positive net present values
and are financially feasible. Your boss...
You have two investments that have positive net present values and are financially feasible. Your boss...
You have two investments that have positive net present values and are financially feasible. Your boss wants you to make a recommendation on which one of the two to invest in given different useful lives? How do you account for this/make the decision?
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a. Determine the net present value for the two machines. Use the table of present values...
a. Determine the net present value for the two
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above. Round to the nearest dollar.
Sewing Machine
Packing Machine
Present value of annual net cash flows
$
$
Amount to be invested
$
$
Net present value
$
$
b. Determine the present value index for the
two machines. If required, round your answers to two decimal
places.
Sewing Machine
Packing Machine
Present value index
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a. Determine the net present value for the two
machines. Use the table of present values of an annuity of $1
above. Round to the nearest dollar.
Sewing Machine
Packing Machine
Present value of annual net cash flows
$
$
Amount to be invested
$
$
Net present value
$
$
b. Determine the present value index for the
two machines. If required, round your answers to two decimal
places.
Sewing Machine
Packing Machine
Present value index
Diamond and Turf...
Problem 4-25 Calculating Present Values (LO 2] You have decided that you want to be a millionaire when you retire in 44 years. a. If you can earn an annual return of 11.34 percent, how much do you have to invest today? (Do not round Intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What if you can earn an annual return of 5.67 percent? (Do not round Intermediate calculations and round your answer to 2...
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