Details:
Please complete the following exercises and/or problems from
the textbook:
E26-19
E26-20
E26-21
E26-24
E26-25
CP26-38
Prepare your answers in an Excel workbook, using one
worksheet per exercise or problem.
Save your workbook using the filename
LastnameFirstinitial.ACC350.T# where the # represents the topic number. For
example, John Doe would submit assignment #5 using the following name:
DoeJ.ACC350.T5.
You are not required to submit this assignment to Turnitin.
E26-19 Using payback to make capital investment decisions
Robinson Hardware is adding a new product line that will
require an investment
of $1,454,000. Managers estimate that this investment will
have a 10-year life and
generate net cash inflows of $300,000 the first year,
$270,000 the second year,
and $260,000 each year thereafter for eight years. Compute
the payback period.
Note: Exercise S26-19 must be completed before attempting
Exercise S26-20.
E26-20 Using ARR to make capital investment decisions
Refer to the Robinson Hardware information in Exercise
E26-19. Assume the
project has no residual value. Compute the ARR for the
investment. Round to
two places.
Janice wants to take the next five years off work to travel
around the world. She
estimates her annual cash needs at $28,000 (if she needs
more, she will work odd
jobs). Janice believes she can invest her savings at 8%
until she depletes her funds.
Requirements
1. How much money does Janice need now to fund her travels?
2. After speaking with a number of banks, Janice learns she
will only be able to
invest her funds at 4%. How much does she need now to fund
her travels?
E26-24 Using NPV and profitability index to make capital
investment decisions
Use the NPV method to determine whether Kyler Products
should invest in the
following projects:
???????? Project A:
Costs $260,000 and offers seven annual net cash inflows of $57,000.
Kyler Products requires an annual return of 16% on
investments of this nature.
???????? Project B:
Costs $375,000 and offers 10 annual net cash inflows of $75,000.
Kyler Products demands an annual return of 14% on
investments of this nature.
Requirements
1. What is the NPV of each project? Assume neither project
has a residual value.
Round to two decimal places.
2. What is the maximum acceptable price to pay for each
project?
3. What is the profitability index of each project? Round to
two decimal places.
Note: Exercise E26-24 must be completed before attempting
Exercise E26-25.
E26-25 Using IRR to make capital investment decisions
Refer to the data regarding Kyler Products in Exercise
E26-24. Compute the IRR
of each project and use this information to identify the
better investment.
