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Present value of an Annuity of $1 in Arrears ? Periods 4% 6% 8% 10% 12%...

Present value of an Annuity of $1 in Arrears

?

Periods

4%

6%

8%

10%

12%

14%

1

0.962

0.943

0.926

0.909

0.893

0.877

2

1.886

1.833

1.783

1.736

1.690

1.647

3

2.775

2.673

2.577

2.487

2.402

2.322

4

3.630

3.465

3.312

3.170

3.037

2.914

5

4.452

4.212

3.993

3.791

3.605

4.433

6

5.242

4.917

4.623

4.355

4.111

3.889

7

6.002

5.582

5.206

4.868

4.564

4.288

8

6.733

6.210

5.747

5.335

4.968

4.639

9

7.435

6.802

6.247

5.759

5.328

4.946

10

8.111

7.360

6.710

6.145

5.650

5.216

?

Cleves Company is considering two projects.

?

Project X

Project Y

Initial investment

$500,000

$100,000

Annual cash flows

$88,500

$34,320

Life of the project

10 years

4 years

Depreciation per year

$50,000

$25,000

Cleves requires a minimum rate of return of 8%.

A. What is the accounting rate of return for each project?
B. What is the net present value for each project?
C. What is the internal rate of return for each project?
D. Given that only one project can be selected, which project should be chosen? Explain your reasoning.

Solutions

Expert Solution

ekkarill92 answered 1 year ago
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