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Accounting: What the Numbers Mean 9th Edition by Wayne W McManus, Daniel F Viele, David H Marshall
Edition 9ISBN: 0073527068Accounting: What the Numbers Mean 9th Edition by Wayne W McManus, Daniel F Viele, David H Marshall
Edition 9ISBN: 0073527068
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Step 1 of 4
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a. | Project B: | |||||
| Initial investment | $(50,000) | ||||
| Present value of net cash return, by year(s): |
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| Years 3-5 = $20,000 * (0.6750 + 0.5921 + 0.5194) | 35,730 | ||||
| Year 6-10 = $12,000 * (5.2161 - 3.4331) | 21,396 | ||||
| Net present value | $ 7,126 | ||||
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| Project C: |
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| Initial investment | $(100,000) | ||||
| Present value of net cash return, by year(s): |
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| Years 1-5 = $32,000 * 3.4331 | 109,859 | ||||
| Net present value | $ 9,859 | ||||
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| Project D: |
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| Initial investment | $(100,000) | ||||
| Present value of net cash return, by year(s): |
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| Year 1 = $10,000 * 0.8772 | 8,772 | ||||
| Year 2 = $20,000 * 0.7695 | 15,390 | ||||
| Year 3 = $30,000 * 0.6750 | 20,250 | ||||
| Year 4 = $40,000 * 0.5921 | 23,684 | ||||
| Year 5 = $50,000 * 0.5194 | 25,970 | ||||
| Net present value | $(5,934) | ||||
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b. |
| Project | ||||
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| B | C | D | E | |
| Initial investment | $50,000 | $100,000 | $100,000 | $200,000 | |
| + Net present value | 7,126 | 9,859 | (5,934) | 5,884 | |
| = PV of inflows | $57,126 | $109,859 | $ 94,066 | $205,884 | |
| / PV of outflows (initial investment) | 50,000 | 100,000 | 100,000 | 200,000 | |
| = Profitability index | 1.14 | 1.10 | 0.94 | 1.03 | |
Step 2 of 4
Step 3 of 4
Step 4 of 4
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