Compute the net present value for each investment

Assignment Help Accounting Basics
Reference no: EM13508988

Average Rate of Return Method,Net Present Value Method, and Analysis

The capital investment committee of Cross Continent Trucking Inc. is considering two capital investments. The estimated income from operations and net cash flows from each investment are as follows:


Warehouse
Tracking Technology
Year Income from
Operations
Net Cash
Flow

Income from
Operations
Net Cash
Flow
1 $46,500
$150,000

$98,000
$240,000
2 46,500
150,000

74,000
203,000
3 46,500
150,000

37,000
143,000
4 46,500
150,000

16,000
98,000
5 46,500
150,000

7,500
66,000
Total $232,500
$750,000

$232,500
$750,000

Each project requires an investment of $620,000. Straight-line depreciation will be used, and no residual value is expected. The committee has selected a rate of 15% for purposes of the net present value analysis.

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

Required:

1a. Compute the average rate of return for each investment. If required, round your answer to one decimal place.


Average Rate of Return
Warehouse %
Tracking Technology %

1b. Compute the net present value for each investment. Use the present value of $1 table present above.


Warehouse Tracking Technology
Present value of net cash flow total: $ $
Less amount to be invested: $ $
Net present value: $

 

Reference no: EM13508988

Questions Cloud

How many cards did each girl have at first : Saly and marbel Had the same number of cards at first. Aafter saly sold 18 of her cards,mabel had four times as many cards as saly. How many cards did each girl have at first?
What angle does the ramp make with respect to the horizontal : Suppose a hockey puck slides down a frictionless ramp with an acceleration of 5.60 m/s2. What angle does the ramp make with respect to the horizontal
What is the most you are willing to pay in points : Two mortgage options are available: a 30-year fixed-rate loan at 6% with no discount points, and a 30-year fixed-rate loan at 5.75% with points. If you are planning on living in the house for 12 years, what is the most you are willing to pay in po..
What is the cars speed at the bottom : A car of mass m is on an icy driveway inclined at an angle ? = 16.0°, What is the car's speed at the bottom
Compute the net present value for each investment : Each project requires an investment of $620,000. Straight-line depreciation will be used, and no residual value is expected. The committee has selected a rate of 15% for purposes of the net present value analysis.
Determine the probability of drawing a poker hand : Determine the probability of drawing a poker hand
Find the average force exerted on the ball by the wall : A 3.20 kg steel ball strikes a wall with a speed of 10.0 m/s at an angle of 60.0° with the surface. what is the average force exerted on the ball by the wall
Estimate the velocities of the two people : A 69.0 kg person throws a 0.0400 kg snowball forward with a ground speed of 35.0 m/s. What are the velocities of the two people after the snowball is exchanged
The outcome of each game is independent : A football team wins 80% of its games. Suppose the team plays 16 games in a season and that the outcome of each game is independent of the outcome of any other game. (For this problem, please show work by hand, rather than using Excel to do th..

Reviews

Write a Review

 

Accounting Basics Questions & Answers

  Ecker company purchased a new machine on may 1 2002 for

ecker company purchased a new machine on may 1 2002 for 176000. at the time of acquisition the machine was estimated to

  The customer signs and completes all paperwork for the sale

given the following scenario on what date would you recognize revenue if preparing financials under u.s. gaap? would

  Bonds payable premium payable expense

On its December 31, Year 1 financial statements, Novastar Corporation would display the following balances: Unamortized Accrued Interest; Bonds Payable Premium Payable Expense:

  Prepare journal entries to record tasha income tax

Prepare journal entries to record Tasha's income tax expense for the current year. Show well-labeled supporting computations for the income tax payable, the valuation allowance, and the change in the deferred tax asset account.

  Partnership interest after the distribution

Compute the gain or loss Howard must recognize on the distribution? Calculate Howard's basis in the stock he received in the distribution?

  What are the total tax consequences for quint in 2012

The PDQ Partnership earned ordinary income of $150,000 in 2012. The partnership has three equal partners, Pete, Donald, and Quint. Quint who is single, uses the standard deduction, and has other income of $15,000 (not connected with the partnershi..

  Investment in prescott-consolidated balance sheet

No investment income was included within either of these income totals. How would the 10% investment in Prescott owned by Bell be presented in the consolidated balance sheet?

  Determining use of indirect approach

Complete the table indicating whether each item (1) should be reported as an operating (O) activity, investing (I) activity, financing (F) activity, or as a noncash (NC) transaction reported in a separate schedule, and (2) represents a cash inflow..

  Decreasing both net income and retained earnings

Increase in prepaid insurance expense, an asset, decreasing both net income and retained earnings by $6,000 and decrease in cash of $6,000.

  How would the assets appear on the balance sheet

Any plans to depreciate the operating assets on a straight-line basis for 20 years. Determine the amount of depreciation expense for 2010 on these newly acquired assets.

  Valuation of inventory

The lower-of-cost-or-market concept is used in the valuation of inventory. Describe this concept. How does this concept affect your company's profitability, or the profitability of a company with which you are familiar?

  Importance of making short term-long term financial decision

Discuss the importance of making short term and long term financial decisions. Which is more important for the firms?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd