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Franklin Modems, Inc. (FMI) has several capital investment opportunities. The term, expected annual cash inflows, and...

Franklin Modems, Inc. (FMI) has several capital investment opportunities. The term, expected annual cash inflows, and the cost of each opportunity are outlined in the following table. FMI has established a desired rate of return of 12 percent for these investment opportunities. (PV of $1 and PVA of $1) (Use appropriate factor(s) from the tables provided.)

Opportunity

A

B

C

D

Investment term

4 years

5 years

3 years

5 years

Expected cash inflow

$

7,200

$

5,300

$

6,700

$

3,600

Cost of investment

$

19,100

$

15,900

$

16,100

$

13,000

   

Required

  1. Compute the net present value of each investment opportunity and record your answers in the following table. The results for Investment Opportunity A have been recorded in the table as an example.
  2. Determine the net present value and the internal rate of return for each investment opportunity. Record the results in the following table. The results for investment Opportunity A have been recorded in the following table as an example. Note that the manual computation yields the same net present value amounts as the financial function routines of Excel or a financial calculator.

Compute the net present value of each investment opportunity and record your answers in the following table.The results for Investment Opportunity A have been recorded in the table as an example. (Negative amounts should indicated by minus sign. Round "Present value factor" to 6 decimal places. Round "Present value of cash flows and Net present value" to 2 decimal places.)

Opportunity

A

B

C

D

Cash inflow

$7,200

$5,300

$6,700

$3,600

Times present value factor

3.037349

Present value of cash flows

$21,868.92

Minus cost of investment

(19,100.00)

(15,900.00)

(16,100.00)

(13,000.00)

Net present value

$2,768.92

Determine the net present value and the internal rate of return for each investment opportunity. Record the results in the following table. The results for investment Opportunity A have been recorded in the following table as an example. Note that the manual computation yields the same net present value amounts as the financial function routines of Excel or a financial calculator. (Negative amounts should indicated by minus sign. Round your answers to 2 decimal places.)

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Opportunity

A

B

C

D

Net present value

$2768.92

Internal rate of return

18.72

%

19.86

%

11.97

%

11.93

%

Solutions

Expert Solution

ekkarill92 answered 2 years ago
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