FileName: b18a48c2dca1f6be022b374de3b19c6335922d0b.xls, Tab: Problem P121B, Page 1 of 2, 12/28/2011, 19:03:27
Name:
Date:
Instructor:
Course:
project are as follows:
Project Brown
Project Red
Project Yellow
Capital investment
$200,000
$225,000
$250,000
Annual net income
Year
1
$25,000
$20,000
$26,000
2
16,000
20,000
24,000
3
13,000
20,000
23,000
4
10,000
20,000
22,000
5
8,000
20,000
20,000
Total
$72,000
$100,000
$115,000
Salvage value is expected to be zero at the end of each project. Depreciation is computed by the straightline method. The company's
required rate of return is the company's cost of capital which is
12%
(Assume that cash flows occur evenly throughout the year.)
Instructions:
Project Brown
Year
Cash Flow
Cumulative Cash Flow
1
Formula
(
Amount
+
Formula )
Formula
2
Formula
(
Amount
+
Formula )
Formula
3
Formula
(
Amount
+
Formula )
Formula
4
Formula
(
Amount
+
Formula )
Formula
5
Formula
(
Amount
+
Formula )
Formula
Cash payback period
Amount

Amount
=
Formula
Formula
÷
Amount
=
Formula Year
Formula years
Project Red
Amount
÷
[(
Amount
+
Amount
)]
=
Formula
years
Project Yellow
Year
Cash Flow
Cumulative Cash Flow
1
Formula
(
Amount
+
Amount )
Formula
2
Formula
(
Amount
+
Amount )
Formula
3
Formula
(
Amount
+
Amount )
Formula
4
Formula
(
Amount
+
Amount )
Formula
5
Formula
(
Amount
+
Amount )
Formula
Cash payback period
Amount

Amount
=
Formula
Formula
÷
Amount
=
Formula Year
Formula years
Project Red
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 Winter '07
 LeonardA.Bacon
 Managerial Accounting, Net Present Value

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