PROBLEM 12

# PROBLEM 12 - value \$43,000 1–5 3.35216 \$144,143(150,000...

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PROBLEM 12-1A (a) Project Moe \$150,000 ÷ [(\$13,000 + \$30,000)] = 3.49 years Project Larry Cash Flow Cumulative Cash Flow \$50,000 (\$18,000 + \$32,000) \$49,000 (\$17,000 + \$32,000) \$48,000 (\$16,000 + \$32,000) \$44,000 (\$12,000 + \$32,000) \$41,000 (\$9,000 + \$32,000) \$50,000 \$99,000 \$147,000 \$191,000 \$232,000 Cash payback period 3.30 years \$160,000 – \$147,000 = \$13,000 \$13,000 ÷ \$44,000 = .30 Project Curly Year Cash Flow Cumulative Cash Flow 1 2 3 4 5 \$67,000 (\$27,000 + \$40,000) \$62,000 (\$22,000 + \$40,000) \$61,000 (\$21,000 + \$40,000) \$53,000 (\$13,000 + \$40,000) \$52,000 (\$12,000 + \$40,000) \$67,000 \$129,000 \$190,000 \$243,000 \$295,000 Cash payback period 3.19 years \$200,000 – \$190,000 = \$10,000 \$10,000 ÷ \$53,000 = .19

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PROBLEM 12-1A (Continued) (b) Project Moe Item Amount Years PV Factor Present Value Net annual cash flows Capital investment Negative net present
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Unformatted text preview: value \$43,000 1–5 3.35216 \$144,143 (150,000) \$ (5,857) Project Larry Project Curly Year Discount Factor Cash Flow PV Cash Flow PV 1 2 3 4 5 Total .86957 .75614 .65752 .57175 .49718 \$ 50,000 49,000 48,000 44,000 41,000 \$232,000 \$ 43,479 37,051 31,561 25,157 20,384 157,632 (160,000) \$ (2,368) \$ 67,000 62,000 61,000 53,000 52,000 \$295,000 \$ 58,261 46,881 40,109 30,303 25,853 201,407 (200,000) \$ 1,407 Capital investment Positive (negative) net present value (c) Project Moe = \$13,000 ÷ [(\$150,000 + \$0) ÷ 2] = 17.33%. Project Larry = \$14,400 ÷ [(\$160,000 + \$0) ÷ 2] = 18%. Project Curly = \$19,000 ÷ [(\$200,000 + \$0) ÷ 2] = 19%. (d) Project Cash Payback Net Present Value Annual Rate of Return Moe Larry Curly 3 2 1 3 2 1 3 2 1 The best project is Curly....
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PROBLEM 12 - value \$43,000 1–5 3.35216 \$144,143(150,000...

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