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Exercise 24-18 (Algo) Net present value, unequal cash flows, and internal rate of return LO P3, P4

Phoenix Company is considering investments in projects C1 and C2. Both require an initial investment of $330,000 and would yield the following annual net cash flows. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.)

Net cash flows	Project C1	Project C2
Year 1	$ 46,000	$ 130,000
Year 2	142,000	130,000
Year 3	202,000	130,000
Totals	$ 390,000	$ 390,000

a. The company requires a 8% return from its investments. Compute net present values using factors from Table B.1 in Appendix B to determine which projects, if any, should be accepted. b. Using the answer from part a, is the internal rate of return higher or lower than 8% for (i) Project C1 and (ii) Project C2? Hint: It is not necessary to compute IRR to answer this question.

The company requires a 8% return from its investments. Compute net present values using factors from Table B.1 in Appendix B to determine which projects, if any, should be accepted. (Negative net present values should be indicated with a minus sign. Round your present value factor to 4 decimals. Round your answers to the nearest whole dollar.)

	Project C1 Net Cash Flows x Present Value of 1 at 8% = Present Value of Net Cash Flows Year 1 = Year 2 = Year 3 = Totals Project C2 Net Cash Flows x Present Value of 1 at 8% = Present Value of Net Cash Flows Year 1 = Year 2 = Year 3 = Totals Which projects, if any, should be accepted

Using the answer from part a, is the internal rate of return higher or lower than 8% for (i) Project C1 and (ii) Project C2? Hint: It is not necessary to compute IRR to answer this question.

	(i) Is the internal rate of return higher or lower than 8% for Project C1? (ii) Is the internal rate of return higher or lower than 8% for Project C2?

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