DeVry BUSN 379 Week 4 Homework – Latest
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WEEK 4
Please
complete the following exercises from Chapter 8 of your textbook and post them
in the Dropbox.
Chapter 8: 3,
4, 5, and 6
3.
Calculating Payback. Global Toys Inc., imposes a payback cutoff of three years
for its international investment projects. If the company has the following two
projects available, should it accept either of them?
Year Cash
Flow (A) Cash Flow (B)
0 ?$55,000 ?$
95,000
1 19,000
18,000
2 27,000
26,000
3 24,000
28,000
4 9,000
260,000
LO 2 4.
Calculating AAR. You’re trying to determine whether or not to expand your
business by building a new manufacturing plant. The plant has an installation
cost of $14 million, which will be depreciated straight-line to zero over its
four-year life. If the plant has projected net income of $1,253,000,
$1,935,000, $1,738,000, and $1,310,000 over these four years, what is the
project’s average accounting return (AAR)?
LO 3 5.
Calculating IRR. A firm evaluates all of its projects by applying the IRR rule.
If the required return is 11 percent, should the firm accept the following
project?
Year Cash
Flow
0 ?$153,000
1 78,000
2 67,000
3 49,000
LO 4 6.
Calculating NPV. For the cash flows in the previous problem, suppose the firm
uses the NPV decision rule. At a required return of 9 percent, should the firm
accept this project? What if the required return was 21 percent?
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