Balloons By Sunset (BBS) is considering the purchase of two new hot air balloons so that it can expand its desert sunset tours. V information about the proposed investment follows: (Euture Value of $1. Present Value of $1. Euture Value Annuity of $1. Present" Annuity of $1.) Note: Use appropriate factor(s) from the tables provided. Initial investment (for two hot air balloons) Useful life Salvage value Annual net income generated BBS's cost of capital Assume straight line depreciation method is used. Required: Help BBS evaluate this project by calculating each of the following: 1. Accounting rate of return. Note: Round your answer to 2 decimal places. 2. Payback period. Note: Round your answer to 2 decimal places. $ 463,000 $ 40,000 $ 39,818 9 years 8% 3. Net present value (NPV). Note: Do not round intermediate calculations. Negative amount should be indicated by a minus sign. Round the final answe nearest whole dollar.
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- Struggling to find the payback period and NPV. I believed pay period to be annual net income+depreciation, then divide that number into initial investment. Please if you can, show me what the right equation is? Thank you for the help in advance. Balloons By Sunset (BBS) is considering the purchase of two new hot air balloons so that it can expand its desert sunset tours. Various information about the proposed investment follows: (Future Value of $1, Present Value of $1. Future Value Annuity of $1. Present Value Annuity of $1.) Note: Use appropriate factor(s) from the tables provided. Initial investment (for two hot air balloons). Useful life Salvage value Annual net income generated BBS's cost of capital Assume straight line depreciation method is used. Required: Help BBS evaluate this project by calculating each of the following: 1. Accounting rate of return. Note: Round your answer to 2 decimal places. $ 536,000 Answer is not complete. 1. Accounting rate of return 2. Payback period…Net Present Value Method, Internal Rate of Return Method, and Analysis for a Service Company The management of Advanced Alternative Power Inc. is considering two capital investment projects. The estimated net cash flows from each project are as follows: Wind Biofuel Year Turbines Equipment 1 $250,000 $480,000 250,000 480,000 3 250,000 480,000 4 250,000 480,000 The wind turbines require an investment of $713,750, while the biofuel equipment requires an investment of $1,457,760. No residual value is expected from either project. Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 1.833 1.736 1.690 1.626 1.528 3 2.673 2.487 2.402 2.283 2.106 4 3.465 3.170 3.037 2.855 2.589 4.212 3.791 3.605 3.353 2.991 4.917 4.355 4.111 3.785 3.326 7 5.582 4.868 4.564 4.160 3.605 8 6.210 5.335 4.968 4.487 3.837 9 6.802 5.759 5.328 4.772 4.031 10 7.360 6.145 5.650 5.019 4.192 Required: la. Compute the net present value for each project. Use a rate…Joliet Company is considering two alternative investments. The company requires an 18% return from its investments. Compute the IRR for both Projects and recommend one of them. For further instructions on internal rate of return in Excel, see Appendix C.
- Question/ Requirement: Determine each project's payback period.How many years? Info Given: Hearne Company has a number of potential capital investments. Because these projects vary in nature, initial investment, and time horizon, management is finding it difficult to compare them. Assume straight line depreciation method is used. (Future Value of $1, Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1.) Project 2: Purchase Patent for New ProductThe patent would cost $3,400,000, which would be fully amortized over five years. Production of this product would generate $425,000 additional annual net income for Hearne.Project 3: Purchase a New Fleet of Delivery TrucksHearne could purchase 25 new delivery trucks at a cost of $115,000 each. The fleet would have a useful life of 10 years, and each truck would have a salvage value of $5,000. Purchasing the fleet would allow Hearne to expand its customer territory resulting in $200,000 of additional net income per year.Use the information provided to answer the questions.Use the information provided below to calculate the following. Where applicable, use the presentvalue tables provided in APPENDICES 1 and 2 that appear after QUESTION 5.5.15.1.1 Calculate the Payback Period of Project A (expressed in years, months and days). INFORMATION Zeda Enterprises has the option to invest in machinery in projects A and B but finance is only available to invest inone of them. You are given the following projected data:Project A Project BInitial cost R300 000 R300 000Scrap value R40 000 0Depreciation per year R52 000 R60 000Net profitYear 1 R20 000Year 2 R30 000Year 3 R50 000Year 4 R60 000Year 5 R10 000Net cash flowsYear 1 R90 000Year 2 R90 000Year 3 R90 000Year 4 R90 000Year 5 R90 000 Additional informationThe discount rate used by the company is 12%.Note: Where applicable, use the present value tables provided in APPENDICES 1 and 2 that appear after QUESTION 5. REQUIRED Use the information given below to calculate the following: 5.1 Payback Period of both projects (expressed in years, months and days) 5.2 Net Present Value of both projects 5.3 Accounting Rate of Return (on average investment) of Project Ron (expressed to two decimal places) Internal Rate of Return (IRR) of Project Hob. Your answer must include the calculation of two net present values as well as the determination of the IRR expressed to two decimal places. INFORMATION 5.4 Trendy Manufacturers is investigating the possibility of investing in one of two projects. The net cash flows for the two competing investment opportunities are as follows: Year 1 2 3 4 5 Project Ron R560 000 R500 000 R400 000 R200 000 R50 000 Project Hob R340 000 R340 000 R340 000 R340 000 R340 000 Each project requires an initial investment of R1 200 000. A scrap value of R50 000 (not included…
- You are asked to evaluate the following two projects for the Norton Corporation. Using the net present value method combined with the profitability index approach described in footnote 2 of this chapter, which project would you select? Use a discount rate of 14 percent. Project X (videotapes of the weather report) ($20,000 investment) Year Cash Flow 1. $10,000 2 8,000 3 9.000 4 8.600 Project X (videotapes of the weather report) ($40,000 investment) Year Cash Flow $20,000 2 13,000 3 14.000 4 16.800Information on four investment proposals is given below: Investment required Present value of cash inflows Net present value Life of the project 4 Required: 1. Compute the project profitability index for each investment proposal. (Round your answers to 2 decimal places.) 2. Rank the proposals in terms of preference. Investment Proposal A BUD C Project Profitability Index Investment Proposal A D $(106,000) $(116,000) $(86,000) $(144,000) 142,040 178,640 118,680 213,120 $36,048 $ 62,640 $ 32,680 $ 69,120 5 years 7 years years 6 years Rank Preference:Given the following attributes of an investment project with a five-year life: investment outlay, year0, $5,000; after-tax cash inflows, year 1, $800; year 2, $900; year 3, $1,500; year 4, $1,800; and year5, $3,200. (a) Use the built-in NPV function of Excel to estimate the NPV of this project. Roundyour answer to the nearest whole dollar. Assume an after-tax discount rate of 12.0%. (b) Estimatethe payback period, in years, for this project under the assumption that cash inflows occur evenlythroughout the year. Round your answer to one 1 decimal place.
- Information on four investment proposals is given below: Investment required. Present value of cash inflows Net present value Life of the project Investment Proposal Required: 1. Compute the profitability index for each investment proposal. Note: Round your answers to 2 decimal places. 2. Rank the proposals in terms of preference. A B C D Profitability Index A $ (150,000) 211,500 $ 61,500 Rank Preference 5 years Investment Proposal B $ (200,000) 275,600 $ 75,600 7 years с $ (180,000) 274,100 $ 94,100 6 years D $ (2,600,000) 3,470,500 $ 870,500 6 yearsInformation on four investment proposals is given below. Investment required Present value of cash inflows Net present value. Life of the project Investment Profitability Index Proposal A B C D $ (280,000) 393,900 $ 113,900 Rank Preference 5 years Investment Proposal B 5 (140,000) 192,800 $ 52,800 Required: 1. Compute the profitability index for each investment proposal (Round your answers to 2 decimal places.) 2. Rank the proposals in terms of preference 7 years $ (50,000) 78,100 $ 28,100 6 years D $ (780,000) 1,038,100 $ 258,100 6 yearsQuestions which require graphical solutions, please use Excel and submit Tables and Graphs with your 1.) Three mutually exclusive alternatives are being considered: A Initial investment Cost $43,000 $24,000 $17,000 Annual net income $4,150 $2,500 $1,700 Rate of Return 7.3% 8.3% 6.0% Each alternative has a 20 -year useful life and no salvage value a) Construct a choice table for interest rates from 1 to 60%. b) Calculate the PW of each alternative and draw the graph of PW vs Interest rate for each alternative on the same chart. c) If the minimum attractive rate of return is 7% which alternative should be selected? Submit the Excel graph and choice table with your solution. I