80.2K

Verified Solution

Link Copied!

Ivanhoe Company is considering two different, mutually exclusive capital expenditure proposals. Project A will cost $415,000, has an expected useful life of 11 years, a salvage value of zero, and is expected to increase net annual cash flows by $71,500. Project B will cost $294,000, has an expected useful life of 11 years, a salvage value of zero, and is expected to increase net annual cash flows by $52,000. A discount rate of 10% is appropriate for both projects. Click here to view PV table. Compute the net present value and profitability index of each project. (If the net present value is negative, use either a negative sign preceding the number eg -45 or parentheses eg (45). Round present value answers to O decimal places, e.g. 125 and profitability index answers to 2 decimal places, e.g. 15.25. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Net present value - Project A Profitability index - Project A Net present value - Project B Profitability index - Project B $ $

Ivanhoe Company is considering two different, mutually exelusive capital expenditure proposals. Project A will cost \$415,000, has an expected useful Me of 11 years, a salvage value of zero, and is expected to increase net annual cash flows by 571,500 . Project B will cost $294,000, has an expected useful life of 11 years, a salvage value of zero, and is expected to increase net annuaicash flows by $52,000, A discount rate of 10% is appropriate for both projects. Click here to view PV table. Compute the net present value and profitability index of each project IIf the net present volue is negative, use either a negotive sign preceding the number es -45 or porentheses es (45). Round present value answers to 0 decimal ploces, es. 125 and profitability inder answers to 2 decimal places, es 15.25. For calculation purposes, use 5 decimal places as displayed in the foctor table provided) Net present value-Project A Profitability index-Projoct A Net present value - Project B Profitabiity index-Project B Ivanhoe Company is considering two different, mutually exclusive capital expenditure proposals. Project A will cost $415,000, has an expected useful life of 11 years, a salvage value of zero, and is expected to increase net annual cash flows by $71,500. Project B will cost $294,000, has an expected useful life of 11 years, a salvage value of zero, and is expected to increase net annual cash flows by $52,000. A discount rate of 10% is appropriate for both projects. Click here to view PV table. Compute the net present value and profitability index of each project. (If the net present value is negative, use either a negative sign preceding the number eg -45 or parentheses eg (45). Round present value answers to 0 decimal places, eg. 125 and profitability index answers to 2 decimal places, e.g. 15.25. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Which project should be accepted based on Net Present Value

Answer & Explanation Solved by verified expert

See Answer