Lesson 2 Chapter 2 Homework × O PA https://newconnect.mheducationQ Search no sso

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Lesson 2 Chapter 2 Homework × O PA https://newconnect.mheducationQ Search no sson 2 Chapter 2 Homework Saved Help Seve & Exit Submit Check my work EX2-6 (Algo) You are the head of the project... 69 oints You are the head of the project selection team at Broken Arrow records. Your team is considering three different recording projects. Based on past history, Broken Arrow expects at least a rate of return of 24%. Given the following information for each project, which one should be Broken Arrow's first prionty Should Broken Arrow fund any of the other projects? (Use the NPV function in Excel to solve thit eBookproblem). Project: Time Fades Away Year Investment Revenue Streas 95,000 17.000 17,000 12.000 Project On the Beach rear Inveatnent Revenue Scream 400,000 400,000 85, 000 22,000 . 24, 000 9, 000 Project: Tonight's the Night Year Inveatment Revenue Stream 0200,000 200, 000 93,000 76, 000 22, 000 9, 000 Which project should be Broken Arrow's first priority? C Prew10 of 13 Next> ication.com/hm.tpstodo 6:25 PM

Explanation / Answer

Calcultion of NPV for each project: Project: Time fades away Year Cash Flow type Cash Flows Discounting Factor @ 24% Discounted Cash Flows 0 Outflow -500000 (1/1.24)^0 1 -500000 1 Inflow 500000 (1/1.24)^1 0.806451613 403225.8065 2 Inflow 95000 (1/1.24)^2 0.650364204 61784.59938 3 Inflow 17000 (1/1.24)^3 0.524487261 8916.283441 4 Inflow 17000 (1/1.24)^4 0.422973598 7190.551162 5 Inflow 12000 (1/1.24)^5 0.34110774 4093.292882 NPV       -14,789.47 Project: On the Beach Year Cash Flow type Cash Flows Discounting Factor @ 24% Discounted Cash Flows 0 Outflow -400000 (1/1.24)^0 1 -400000 1 Inflow 400000 (1/1.24)^1 0.806451613 322580.6452 2 Inflow 85000 (1/1.24)^2 0.650364204 55280.95734 3 Inflow 22000 (1/1.24)^3 0.524487261 11538.71975 4 Inflow 24000 (1/1.24)^4 0.422973598 10151.36635 5 Inflow 9000 (1/1.24)^5 0.34110774 3069.969661 NPV           2,621.66 Project: Tonight's the Night Year Cash Flow type Cash Flows Discounting Factor @ 24% Discounted Cash Flows 0 Outflow -200000 (1/1.24)^0 1 -200000 1 Inflow 200000 (1/1.24)^1 0.806451613 161290.3226 2 Inflow 93000 (1/1.24)^2 0.650364204 60483.87097 3 Inflow 76000 (1/1.24)^3 0.524487261 39861.03186 4 Inflow 22000 (1/1.24)^4 0.422973598 9305.419151 5 Inflow 9000 (1/1.24)^5 0.34110774 3069.969661 NPV         74,010.61 Which project should be Broken Arrow's first priority? Project: Tonight's the Night Its NPV 74010.61 Which is the second most favourable project? Project: On the Beach the NPV of second most favourable 2621.66 Should the second project be undertaken Yes, The NPV is Positive and it is satifying 24% return on investment also.

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