Question

In: Accounting

Your company is choosing between two​ alternatives, A and B. Both have a useful life of...

Your company is choosing between two​ alternatives, A and B. Both have a useful life of 9 years. A has an initial investment of​ $4,000 and an expected profit of​ $1,000 in Year​ 1, which you expect to grow by​ 4% each year thereafter​ (a geometric​ gradient). B has an initial investment of​ $5,000 and an expected profit of​ $1,200 in Year​ 1, which you expect to grow by​ 5% in each year thereafter​ (another geometric​ gradient). If your company has a MARR of​ 8%, what is the present worth of each​ project?

Solutions

Expert Solution

Please refer the solution provided. For any Queries please comment. All the part have been solved. If any calculation are not clear please comment we will surely help you with the same. Thank you !

ekkarill92 answered 1 year ago
Next > < Previous

Related Solutions

Two mutually exclusive alternatives of A and B have both useful lives of 6 years. For...
Two mutually exclusive alternatives of A and B have both useful lives of 6 years. For Alternative A there is an initial cost of $7,200, and the annual benefits, which is $2,100 for the first year and it increases by $120 each year for the next 5 years. For Alternative B, there is an initial cost of $3000 and the annual benefits, which is $1200 for the first year, and it increases by $100 each year for the next 5...
Two mutually exclusive alternatives are bring considered: A and B. Both alternatives cost $1,200 at the...
Two mutually exclusive alternatives are bring considered: A and B. Both alternatives cost $1,200 at the present. However, the pattern of revenue from them is different. Alternative A has the potential to bring more revenues later in the project life. The expected revenues of alternative A are: $350, $500, and $850 by the ends of years one to three, respectively. Alternative B promises more immediate cash inflow which is expected to diminish with time: $750, $300, and $100 by the...
Two mutually exclusive alternatives are bring considered: A and B. Both alternatives cost $1,200 at the...
Two mutually exclusive alternatives are bring considered: A and B. Both alternatives cost $1,200 at the present. However, the pattern of revenue from them is different. Alternative A has the potential to bring more revenues later in the project life. The expected revenues of alternative A are: $350, $500, and $850 by the ends of years one to three, respectively. Alternative B promises more immediate cash inflow which is expected to diminish with time: $750, $300, and $100 by the...
here are two alternatives first is terminator system that costs 280000 it has a useful life...
here are two alternatives first is terminator system that costs 280000 it has a useful life of 9 years and a salvage value of 15000. the other alternative is skynet that costs 345000 and has a useful life of 9 years and a salvage value of 32000. the CCA rate is 20% and tax rate is 28%. Both projects will require an additional working capital investment. For the Terminator System, net working capital will increase by $10,000 at time zero...
Fairwell company has recorded the following data related to two alternatives A and B. Both require...
Fairwell company has recorded the following data related to two alternatives A and B. Both require an investment of $56,125 Year ACFs after depre.Tax                                     ACFs after depre. Tax 1 $3,375 11,375 2 5,373 9,375 3 7,375 7,375 4 9,375 5,375 5   11,375 3,37   36,875 36,875 Cost of capital 10%                              Estimated life 5 years 5 years Estimated salvage value $3,000 $3,000 Tax rate 55% 55% Depreciation has been charged on straight line basis calculate: ARR Payback period Net present value Profitability...
Discuss a scenario in your life where you had to choose between two different alternatives. List...
Discuss a scenario in your life where you had to choose between two different alternatives. List the financial as well as the nonfinancial implications of each choices. What did you decide? Why?
A company is considering an investment that will cost $743,000 and have a useful life of...
A company is considering an investment that will cost $743,000 and have a useful life of 8 years. The cash flows from the project are expected to be $410,000 per year in the first two years then $142,000 per year for the last 6 years. If the appropriate discount rate is 12.7 percent per annum, what is the NPV of this investment (to the nearest dollar)? Select one: a. $394283 b. $1880283 c. $384492 d. $516026
A company is considering an investment that will cost $744,000 and have a useful life of...
A company is considering an investment that will cost $744,000 and have a useful life of 8 years. The cash flows from the project are expected to be $512,000 per year in the first two years then $108,000 per year for the last 6 years. If the appropriate discount rate is 15.0 percent per annum, what is the NPV of this investment (to the nearest dollar)? Select one: a. $397417 b. $1885417 c. $415178 d. $497087
The following two investment alternatives are being evaluated using the​ B/C ratio method. The alternatives have...
The following two investment alternatives are being evaluated using the​ B/C ratio method. The alternatives have a​ 5-year service life and the MARR is 18​% per year. Alternative A Alternative B Capital investment ​$10,900    ​$16,000    Annual revenues 4,000   7,500   Annual costs 250   900   Market value at EOY 5 5,000   9,200   Click the icon to view the interest and annuity table for discrete compounding when i equals=18​%per year. Calculate the modified​ B/C ratio of Alternative A A. 1.32 B.1.35 C.1.26 D.0.90...
You’re choosing between two job offers. Both are with respected organizations and desirable work. The first...
You’re choosing between two job offers. Both are with respected organizations and desirable work. The first offer is with a large, well-established firm at $22,000 per year in salary plus noncontributory benefits worth $7,000 per year. The other job is a small business with salary of $30,000 per year without employer voluntary benefits (the employer is required to pay for social insurance programs). a. What factors should be considered in determining the better offer? Which package do you think maximizes...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT