The following information relates to three independent investment decisions by B
ID: 2380666 • Letter: T
Question
The following information relates to three independent investment decisions by Buckle Enterprises, each with a 10-year life and no salvage value:
Using the present value tables in Exhibits 26-3 and 26-4, compute the missing information pertaining to each investment proposal. (Round "PV factors" to 3 decimal places and your final answers to the nearest dollar amount. Omit the "$" & "%" signs in your response.)
The following information relates to three independent investment decisions by Buckle Enterprises, each with a 10-year life and no salvage value:
The following information relates to three independent investment decisions by Buckle Enterprises, each with a 10-year life and no salvage value: Using the present value tables in Exhibits 26-3 and 26-4, compute the missing information pertaining to each investment proposal. (Round "PV factors" to 3 decimal places and your final answers to the nearest dollar amount. Omit the "$" & "%" signs in your response.)Explanation / Answer
Project A
Annual cashflows = 15,000-6,900 = 8,100
Annuity factor from table = 6.145
Investment cost = 8,100*6.145 = 49,775
Project B
Annuity factor from table = 5.650
So annual cashflows = investment cost/annuity factor = 141,250/5.650 = 25,000
Annual cash outflow = 37,000-25,000 = 12,000
Project C
Annual cashflows = 18,000-7,000 = 11,000
Annuity factor = investment cost/annual cashflows = 80,960/11,000 = 7.36
Looking at annuity table, we can see that discount rate = 6%
Hope this helped ! Let me know in case of any queries.
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