ACC - NPV with Unequal Cash Flows - Sanchez Corporation
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NPV with Unequal Cash Flows
Sanchez Corporation is considering three long-term capital investment proposals. Relevant data on each project are as follows.
Project | |||||||
Brown | Red | Yellow | |||||
Capital investment: | 190,000 | 220,000 | 250,000 | ||||
Annual net income: | |||||||
Year | 1 | 25,000 | 20,000 | 26,000 | |||
2 | 16,000 | 20,000 | 24,000 | ||||
3 | 13,000 | 20,000 | 23,000 | ||||
4 | 10,000 | 20,000 | 17,000 | ||||
5 | 8,000 | 20,000 | 20,000 | ||||
Total | 72,000 | 100,000 | 110,000 | ||||
Salvage value is expected to be zero at the end of each project. Depreciation is computed by the straight-line method. The company’s minimum rate of return is the company’s cost of capital which is 12%.
Instructions:
Compute the net present value for each project. (Round to the nearest dollar.)
12 years ago
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acc_-_npv_with_unequal_cash_flows_-_sanchez_corporation_solution.xlsx
