The following data are accumulated by Watershed Inc. in evaluating two competing capital investment proposals: Project A Project Z Amount of investment $56,000 $32,000 Useful life 4 years 9 years Estimated residual value Estimated total income over the useful life $5,040 $10,080 Determine the expected average rate of return for each project. Round your answers to one decimal place. Project A Project Z

The following data are accumulated by Watershed Inc. in evaluating two competing capital investment proposals: Project A Project Z Amount of investment $56,000 $32,000 Useful life 4 years 9 years Estimated residual value Estimated total income over the useful life $5,040 $10,080 Determine the expected average rate of return for each project. Round your answers to one decimal place. Project A Project Z

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 21P

See similar textbooks

Similar questions

Project S has a cost of $10,000 and is expected to produce benefits (cash flows) of $3,000 per year for 5 years. Project L costs $25,000 and is expected to produce cash flows of $7,400 per year for 5 years. Calculate the two projects’ NPVs, IRRs, MIRRs, and PIs, assuming a cost of capital of 12%. Which project would be selected, assuming they are mutually exclusive, using each ranking method? Which should actually be selected?
Fenton, Inc., has established a new strategic plan that calls for new capital investment. The company has a 9.8% required rate of return and an 8.3% cost of capital. Fenton currently has a return of 10% on its other investments. The proposed new investments have equal annual cash inflows expected. Management used a screening procedure of calculating a payback period for potential investments and annual cash flows, and the IRR for the 7 possible investments are displayed in image. Each investment has a 6-year expected useful life and no salvage value. A. Identify which project(s) is/are unacceptable and briefly state the conceptual justification as to why each of your choices is unacceptable. B. Assume Fenton has $330,000 available to spend. Which remaining projects should Fenton invest in and in what order? C. If Fenton was not limited to a spending amount, should they invest in all of the projects given the company is evaluated using return on investment?
There are two projects under consideration by the Rainbow factory. Each of the projects will require an initial investment of $35,000 and is expected to generate the following cash flows: Use the information from the previous exercise to calculate the internal rate of return on both projects and make a recommendation on which one to accept. For further instructions on internal rate of return in Excel, see Appendix C.
The following data are accumulated by Watershed Inc. in evaluating two competing capital investment proposals: Project A Project Z Amount of investment $64,000 $84,000 Useful life 4 years 9 years Estimated residual value 0 0 Estimated total income over the useful life $8,960 $43,470 Determine the expected average rate of return for each project. Round your answers to one decimal place. Project A % Project Z %
Average Rate of Return The following data are accumulated by Watershed Inc. in evaluating two competing capital investment proposals: Amount of investment Useful life Estimated residual value Estimated total income over the useful life Project A Project Z $80,000 $64,000 4 years 9 years 0 0 $6,400 $20,160 Determine the expected average rate of return for each project. Round your answers to one decimal place. Project A Project Z Feedback Check My Work X % X %
The following data are accumulated by Watershed Inc. in evaluating two competing capital investment proposals: Project A Project Z Amount of investment $64,000 $48,000 Useful life 4 years 5 years Estimated residual value 0 0 Estimated total income over the useful life $8,960 $12,600 Determine the expected average rate of return for each project. Round your answers to one decimal place.
The following data are accumulated by Patterson Inc. in evaluating two competing capital investment proposals: Line Item Description Project C Project T Amount of investment $84,000 $96,000 Useful life 4 years 5 years Estimated residual value 0 0 Estimated total income over the useful life $6,720 $15,600 Determine the expected average rate of return for each project. Round your answers to one decimal place. Line Item Description Percentages Project C fill in the blank 1% Project T fill in the blank 2%
Average rate of return The following data are accumulated by Patterson Inc. in evaluating two competing capital investment proposals: Amount of investment Useful life Estimated residual value Estimated total income over the useful life Project C Project T $24,000 $40,000 4 years 9 years 0 0 $3,120 $20,700 Determine the expected average rate of return for each project. Round your answers to one decimal place. Project C X % Project T X %
Average Rate of Return The following data are accumulated by Watershed Inc. in evaluating two competing capital investment proposals: Project A Project Z Amount of investment $28,000 $88,000 Useful life 4 years 9 years Estimated residual value 0 Estimated total income over the useful life $2,240 $25,740 Determine the expected average rate of return for each project. Round your answers to one decimal place Project A Project Z
Average rate of return The following data are accumulated by Patterson Inc. in evaluating two competing capital investment proposals: Amount of investment Useful life Feedback Estimated residual value $6,760 $6,600 Estimated total income over the useful life Determine the expected average rate of return for each project. Round your answers to one decimal place. Project C Project T 4.5 X % Project C Project T $52,000 $24,000 4 years 8 X % years 0 0
Average rate return: the following data accumulate by watershed inc. and evaluating two competing capital investment proposal: amount invested- $80,000 project A and project Z $52,000 Useful life- project A 4 years and project Z 5 years Estimate residual value- project A 0 and project Z 0 Estimate the total income over the useful life. Project A $8,800 project Z $11,050 Determine the expected average rate of return for each project. Round your answer to one decimal place.
Company A has provided figures for two investment projects, only one of which may be chosen. These are the calculations based on the figures: Payback Period The Accounting Rate of Return / Return on Capital Employed Net Present Value Project A 2 years 4 months 27.08% £63,705 Project B 2 years 7 months 39.47% £74.971 Analyse and provide recommendations as to what project needs to be chosen based on the calculations above.