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The wind turbines require an investment of $713,750, whi the biofuel equipment requires an investment of $1,518,500. 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 0.833 2 1.833 1.528 3 2.673 2.106 4 3.465 2.589 ) 5 4.212 2.991 6 4.917 3.326 5.582 3.605 6.210 4.487 3.837 6.802 4.772 4.031 7.360 5.019 4.192 7 8 9 10 Required: Net present value. 0.909 1.736 2.487 3.170 3.791 4.355 4.868 5.335 5.759 6.145 Present value of annual net cash flows Amount to be invested. 0.893 1.690 2.402 3.037 3.605 4.111 4.564 4.968 5.328 5.650 Wind Turbines Biofuel Equipment 1a. Compute the net present value for each project. Use rate of 10% and the present value of an annuity of $1 in the table above. If required, use the minus sign to indicate a negative net present value. If required, round to the nearest whole dollar. 0.870 Internal rate of return 1.626 2.283 Present value factor for an annuity of $1 2.855 3.353 3.785 4.160 Wind Turbines. Biofuel Equipment $ $ 1b. Compute a present value index for each project. If required, round your answers to two decimal places. Present Value Index $ $ 2. Determine the internal rate of return for each project E (a) computing a present value factor for an annuity of $1 and (b) using the present value of an annuity of $1 in the table above. If required, round your present value factor answers to three decimal places and internal rate of return to the nearest whole percent. Wind Turbines % B

The wind turbines require an investment of $713,750, whi the biofuel equipment requires an investment of $1,518,500. 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 0.833 2 1.833 1.528 3 2.673 2.106 4 3.465 2.589 ) 5 4.212 2.991 6 4.917 3.326 5.582 3.605 6.210 4.487 3.837 6.802 4.772 4.031 7.360 5.019 4.192 7 8 9 10 Required: Net present value. 0.909 1.736 2.487 3.170 3.791 4.355 4.868 5.335 5.759 6.145 Present value of annual net cash flows Amount to be invested. 0.893 1.690 2.402 3.037 3.605 4.111 4.564 4.968 5.328 5.650 Wind Turbines Biofuel Equipment 1a. Compute the net present value for each project. Use rate of 10% and the present value of an annuity of $1 in the table above. If required, use the minus sign to indicate a negative net present value. If required, round to the nearest whole dollar. 0.870 Internal rate of return 1.626 2.283 Present value factor for an annuity of $1 2.855 3.353 3.785 4.160 Wind Turbines. Biofuel Equipment $ $ 1b. Compute a present value index for each project. If required, round your answers to two decimal places. Present Value Index $ $ 2. Determine the internal rate of return for each project E (a) computing a present value factor for an annuity of $1 and (b) using the present value of an annuity of $1 in the table above. If required, round your present value factor answers to three decimal places and internal rate of return to the nearest whole percent. Wind Turbines % B

Managerial Accounting
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter12: Capital Investment Analysis
Section: Chapter Questions
Problem 4PA: Net present value method, internal rate of return method, and analysis for a service company The...
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The wind turbines require an investment of $713,750, while the biofuel equipment requires an investment of $1,518,500. No residual value is expected from either project. Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 0.909 0.870 0.833 1.736 1.528 2.487 2.283 2.106 3.170 2.855 2.589 4.212 3.791 2.991 4.917 4.355 3.326 5.582 4.868 3.605 6.210 5.335 3.837 6.802 5.759 4.031 7.360 6.145 4.192 1 2 3 4 5 6 7 8 9 10 0.943 1.833 2.673 3.465 Required: Amount to be invested 0.893 Present value of annual net cash flows Net present value 1.690 2.402 3.037 3.605 3.353 4.111 3.785 4.564 4.968 5.328 5.650 1a. Compute the net present value for each project. Use a rate of 10% and the present value of an annuity of $1 in the table above. If required, use the minus sign to indicate a negative net present value. If required, round to the nearest whole dollar. Wind Turbines Biofuel Equipment 1.626 4.160 4.487 4.772 5.019 Present value factor for an annuity of $1. Internal rate of return Wind Turbines $ Biofuel Equipment 1b. Compute a present value index for each project. If required, round your answers to two decimal places. Present Value Index $ 2. Determine the internal rate of return for each project by (a) computing a present value factor for an annuity of $1 and (b) using the present value of an annuity of $1 in the table above. If required, round your present value factor answers to three decimal places and internal rate of return to the nearest whole percent. Wind Turbines % 3. The net present value, present value index, and internal rate of return all indicate that the is/are a better financial opportunity compared to the , although both investments meet the minimum return criterion of 10%. Biofu
Transcribed Image Text:The wind turbines require an investment of $713,750, while the biofuel equipment requires an investment of $1,518,500. No residual value is expected from either project. Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 0.909 0.870 0.833 1.736 1.528 2.487 2.283 2.106 3.170 2.855 2.589 4.212 3.791 2.991 4.917 4.355 3.326 5.582 4.868 3.605 6.210 5.335 3.837 6.802 5.759 4.031 7.360 6.145 4.192 1 2 3 4 5 6 7 8 9 10 0.943 1.833 2.673 3.465 Required: Amount to be invested 0.893 Present value of annual net cash flows Net present value 1.690 2.402 3.037 3.605 3.353 4.111 3.785 4.564 4.968 5.328 5.650 1a. Compute the net present value for each project. Use a rate of 10% and the present value of an annuity of $1 in the table above. If required, use the minus sign to indicate a negative net present value. If required, round to the nearest whole dollar. Wind Turbines Biofuel Equipment 1.626 4.160 4.487 4.772 5.019 Present value factor for an annuity of $1. Internal rate of return Wind Turbines $ Biofuel Equipment 1b. Compute a present value index for each project. If required, round your answers to two decimal places. Present Value Index $ 2. Determine the internal rate of return for each project by (a) computing a present value factor for an annuity of $1 and (b) using the present value of an annuity of $1 in the table above. If required, round your present value factor answers to three decimal places and internal rate of return to the nearest whole percent. Wind Turbines % 3. The net present value, present value index, and internal rate of return all indicate that the is/are a better financial opportunity compared to the , although both investments meet the minimum return criterion of 10%. Biofu
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: Year 3 4 5 6 1 7 8 2 9 10 3 4 The wind turbines require an investment of $713,750, while the biofuel equipment requires an investment of $1,518,500. 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 0.909 0.893 0.870 0.833 2 1.690 1.626 1.528 2.106 0.943 1.833 2.673 3.465 4.212 Wind Turbines $250,000 250,000 250,000 250,000 3.170 3.791 4.917 4.355 5.582 4.868 6.210 5.335 6.802 5.759 7.360 6.145 Required: Biofuel Equipment 1.736 2.487 Amount to be invested Net present value $500,000 500,000 500,000 500,000 Wind Turbines Biofuel Equipment 2.402 3.037 Present value of annual net cash flows 2.283 2.855 3.605 3.353 4.111 3.785 4.564 4.160 4.968 4.487 5.328 4.772 5.650 5.019 1a. Compute the net present value for each project. Use a rate of 10% and the present value of an annuity of $1 in the table above. If required, use the minus sign to indicate a negative net present value. If required, round to the nearest whole dollar. 2.589 2.991 $ 3.326 3.605 3.837 4.031 4.192 Wind Turbines $ Biofuel Equipment $ $ 1b. Compute a present value index for each project. If required, round your answers to two decimal places. Present Value Index 2. Determine the internal rate of return for each project by (a) computing a present value factor for an annuity of $1 and (b) using the present value of an annuity of $1 in the
Transcribed Image Text: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: Year 3 4 5 6 1 7 8 2 9 10 3 4 The wind turbines require an investment of $713,750, while the biofuel equipment requires an investment of $1,518,500. 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 0.909 0.893 0.870 0.833 2 1.690 1.626 1.528 2.106 0.943 1.833 2.673 3.465 4.212 Wind Turbines $250,000 250,000 250,000 250,000 3.170 3.791 4.917 4.355 5.582 4.868 6.210 5.335 6.802 5.759 7.360 6.145 Required: Biofuel Equipment 1.736 2.487 Amount to be invested Net present value $500,000 500,000 500,000 500,000 Wind Turbines Biofuel Equipment 2.402 3.037 Present value of annual net cash flows 2.283 2.855 3.605 3.353 4.111 3.785 4.564 4.160 4.968 4.487 5.328 4.772 5.650 5.019 1a. Compute the net present value for each project. Use a rate of 10% and the present value of an annuity of $1 in the table above. If required, use the minus sign to indicate a negative net present value. If required, round to the nearest whole dollar. 2.589 2.991 $ 3.326 3.605 3.837 4.031 4.192 Wind Turbines $ Biofuel Equipment $ $ 1b. Compute a present value index for each project. If required, round your answers to two decimal places. Present Value Index 2. Determine the internal rate of return for each project by (a) computing a present value factor for an annuity of $1 and (b) using the present value of an annuity of $1 in the
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