(A) Sunny Company is investigating four different opportunities. Information on the four projects under study...
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A Sunny Company is investigating four different opportunities. Information on the four projects under study is as follows: Project Investment required $ $ $ $ Present value of cash inflows Net present value $ $ $ $ Life of project years years years years The companys required rate of return is ; therefore a discount rate has been used in the present value computations above. Limited funds are available for investment, so the company cannot accept all of the available projects. Required: a Compute the profitability index for each investment project. b Rank the four projects according to preference, in terms of: i Net present value, ii Profitability index. B Snow Company is considering the purchase of a new piece of equipment for laying sod. Relevant information concerning the equipment follows: Cost of Equipment $ Annual Cost saving from new equipement $ Expected Annual Net Income year Expacted Annual Income $ Compute the annual rate of return on the equipment
A Sunny Company is investigating four different opportunities. Information on the four projects under study is as follows:
Project
Investment required $ $ $ $
Present value of cash inflows
Net present value $ $ $ $
Life of project years years years years
The companys required rate of return is ; therefore a discount rate has been used in the present value computations above. Limited funds are available for investment, so the company cannot accept all of the available projects.
Required:
a Compute the profitability index for each investment project.
b Rank the four projects according to preference, in terms of:
i Net present value, ii Profitability index.
B Snow Company is considering the purchase of a new piece of equipment for laying sod. Relevant information concerning the equipment follows:
Cost of Equipment $
Annual Cost saving from new equipement $
Expected Annual Net Income year
Expacted Annual Income $
Compute the annual rate of return on the equipment
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