Name:
Section:
Score: 0%
Key Code:
1. a. Average annual rate of return for both projects:
b. Net present value analysis:
Year
Dist. Center
Expansion
Tracking
Technology
Dist. Center
Expansion
Tracking
Technology
1
2. Which of the following points are valid and should be reported to the investment committee?
a. Considering only quantitative factors, the tracking technology investment should
be selected since it has a positive net present value.
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Problem 15-1
Instructions
=
Present Value
of $1 at 15%
Factor
Net Cash Flows
Present Value of
Net Cash Flows
Name:
Section:
Score: See student sheet for student’s score
Scoring:
1. a. Average annual rate of return for both projects:
$330,000 5
$800,000
2
b. Net present value analysis:
Year
Dist. Center
Expansion
Tracking
Technology
Dist. Center
Expansion
Tracking
Technology
2. Which of the following points should be reported to the investment committee?
a. Considering only quantitative factors, the tracking technology investment should
be selected since it has a positive net present value. T
Problem 15-1
SOLUTION
Instructions
16.5%
ON
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=
Present Value of
Net Cash Flows
Present Value
of $1 at 15%
Factor
Net Cash Flows
Name:
Section:
Score: 0%
Key Code:
1. a.
Year
Cumulative
Net Cash
Flow
Year
Cumulative
Net Cash
Flow
1 1
b. Net present value analysis:
Year
Canadian
Cycling
European
Hiking
Canadian
Cycling
European
Hiking
2. Which of the following points are valid and should be included in the report?
a. Both products offer the same total net cash flows.
2
Net Cash Flows
Canadian Cycling
European Hiking
Net Cash Flow
Net Cash Flow
Present Value of
Net Cash Flows
Present Value of
$1 at 10% Factor
Problem 15-2
Instructions
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e. Both products provide a positive net present value. This means both products
would be acceptable, since they exceed the minimum rate of return.
Name:
Section:
Score: See student sheet for student’s score
Scoring:
1. a.
Year
Cumulative
Net Cash
Flow
Year
Cumulative
Net Cash
Flow
b. Net present value analysis:
Year
Canadian
Cycling
European
Hiking
Canadian
Cycling
European
Hiking
10.909 220,000$ 188,000$ 199,980$ 170,892$
20.826 180,000 212,000 148,680 175,112
2. Which of the following points are valid and should be included in the report?
a. Both products offer the same total net cash flows.
TRUE
d. European Cycling is not an acceptable investment since it provides less than
the minimum required rate of return. FALSE
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Net Cash Flows
Present Value of
$1 at 10% Factor
Present Value of
Net Cash Flows
Problem 15-2
SOLUTION
Instructions
Net Cash Flow
Net Cash Flow
ON
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Canadian Cycling
European Hiking
e. Both products provide a positive net present value. This means both products
would be acceptable, since they exceed the minimum rate of return. TRUE
Name:
Section:
Score: 0%
Key Code:
1.
Year
Net Cash
Flows
=
1
2
Year
Net Cash
Flows
=
1
Year
Net Cash
Flows
=
2.
Present value index of product line:
=
A red asterisk (*) will appear beside, below or above an incorrect answer.
Product Line Expansion
Computer System Upgrade
Present Value of
$1 at 15% Factor
Present Value of Net
Cash Flows
Present Value of
$1 at 15% Factor
Present Value of Net
Cash Flows
Internet Bill-Pay
Problem 15-3
Instructions
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2
Present Value of
$1 at 15% Factor
Present Value of Net
Cash Flows
Present Value Index
=
Total Present Value of Net Cash Flows
Amount to Be Invested
3. Indicate which of the following statements are true (T) and which are false (F).
a. The computer system upgrade has the largest present value index
Name:
Section:
Score: See student sheet for student’s score
Scoring:
1.
Year
Net Cash
Flows
=
10.870 490,000$ 426,300$
Year
Net Cash
Flows
=
10.870 350,000$ 304,500$
20.756 315,000 238,140
Year
Net Cash
Flows
=
2.
Problem 15-3
SOLUTION
Product Line Expansion
Instructions
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ON
Present Value of
$1 at 15% Factor
Present Value of Net
Cash Flows
Computer System Upgrade
Present Value of
$1 at 15% Factor
Present Value of Net
Cash Flows
Internet Bill-Pay
Present Value of
$1 at 15% Factor
Present Value of Net
Cash Flows
Present Value Index
=
Total Present Value of Net Cash Flows
Amount to Be Invested
$726,880
$665,000
3. Indicate which of the following statements are true (T) and which are false (F).
a. The computer system upgrade has the largest present value index T
Present value index of computer system:
=
1.09
Present value index of Internet bill-pay:
=
0.98
Name:
Section:
Score: 0%
Key Code:
Office Building
Year
Present Value
of $1 at 15%
Factor
Net Cash
Flows
=
Present
Value of Net
Cash Flows
1
Condominium Complex
Year
Present Value
of $1 at 15%
Factor
Net Cash
Flows
=
Present
Value of Net
Cash Flows
1
Indicate which of the following statements are true (T) and which are false (F).
a. Both projects are acceptable investments.
Exercise 15-21
Instructions
2
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enough investment money for one project.
Name:
Section:
Score: See student sheet for student’s score
Scoring:
Office Building
Year
Present Value
of $1 at 15%
Factor
Net Cash
Flows
=
Present
Value of Net
Cash Flows
10.870 950,000$ 826,500$
20.756 600,000 453,600
Condominium Complex
Year
Present Value
of $1 at 15%
Factor
Net Cash
Flows
=
Present
Value of Net
Cash Flows
10.870 1,200,000$ 1,044,000$
20.756 900,000 680,400
Indicate which of the following statements are true (T) and which are false (F).
a. Both projects are acceptable investments. T
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Exercise 15-21
SOLUTION
Instructions
ON