P1021 all techniques conflicting rankings nicholson

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P10–21 All techniques, conflicting rankings Nicholson Roofing Materials, Inc., is considering two mutually exclusive projects, each with an initial investment of $150,000. The company’s board of directors has set a maximum 4-year payback requirement and has set its cost of capital at 9%. The cash inflows associated with the two projects are shown in the following table. Cash inflows ( CF t ) Year Project A Project B 1 $45,000 $75,000 2 45,000 60,000 3 45,000 30,000 4 45,000 30,000 5 45,000 30,000
Cash inflows ( CF t ) Year Project A Project B 6 45,000 30,000 a. Calculate the payback period for each project.
b. Calculate the NPV of each project at 0%.
c. Calculate the NPV of each project at 9%.
d. Derive the IRR of each project.
P11–1 Classification of expenditures Given the following list of outlays, indicate whether each is normally considered a capital expenditure or an operating expenditure . Explain your answers. a. An initial lease payment of $5,000 for electronic point-of-sale cash register systems
b. An outlay of $20,000 to purchase patent rights from an inventor
c. An outlay of $80,000 for a major research and development program
d. An $80,000 investment in a portfolio of marketable securities

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