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1.
Proposal A: -year, -month cash payback period
Net Cash Cumulative
Year and Months Flow Net Cash Flows
Year 1
Year 2
Year 3
Year 4
Proposal B: -year, -month cash payback period
Net Cash Cumulative
Year and Months Flow Net Cash Flows
Year 1
Year 2
Year 3
Year 4
Proposal C: -year, -month cash payback period
Net Cash Cumulative
Year and Months Flow Net Cash Flows
Year 1
Year 2
Year 3
Year 4
Proposal D: -year, -month cash payback period
Net Cash Cumulative
Year and Months Flow Net Cash Flows
Year 1
Payback Period
0%
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Key Code:
Instructions
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Problem 26(12)-6B
Name:
Section:
2.
Proposal A:
Proposal B:
Proposal C:
Proposal D:
3.
Cash Payback Period Average Rate Accept for
Proposal Years Months of Return
A
B
C
D
4., 5.
Present Present
Value of Net Cash Value of Net
$1 at 12%
Flow =Cash Flow
Year 1
Year 2
Average Rate of Return
=
=
Net Present Value and Present Value Index
=
=
Total
Amount to be invested
Net present value
Present value index
Present Present
Value of Net Cash Value of Net
$1 at 12%
Flow =Cash Flow
Year 1
Year 2
Year 3
Year 4
Year 5
Total
Amount to be invested
Net present value
6., 7.
Based on net present value calculated in Part 4, the proposals should be ranked as follows:
Rank 1
Rank 2
Based on present value index calculated in Part 5, the proposals should be ranked as follows:
Rank 1
Rank 2
8.
[Key essay answer here]
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1.
Net Cash Cumulative
Year and Months Flow Net Cash Flows
Year 1 full year 120,000$ 120,000$
Net Cash Cumulative
Year and Months Flow Net Cash Flows
Year 1 full year 100,000$ 100,000$
Net Cash Cumulative
Net Cash Cumulative
Year and Months Flow Net Cash Flows
Year 1 full year 200,000$ 200,000$
Problem 26(12)-6B
Name:
Solution
Section:
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ON
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Score:
Instructions
Payback Period
Year 4 N/A – –
2.
Proposal A:
Proposal B:
Proposal C:
Proposal D:
3.
Cash Payback Period Average Rate Accept for
Proposal Years Months of Return
A 4 0 5.3% Reject
4., 5.
Present Present
Value of Net Cash Value of Net
$1 at 12%
Flow =Cash Flow
Year 1 0.893 100,000$ 89,300$
Proposal B:
Average Rate of Return
Net Present Value and Present Value Index
Present Present
Value of Net Cash Value of Net
$1 at 12%
Flow
=Cash Flow
6., 7.
Based on net present value calculated in Part 4, the proposals should be ranked as follows:
Based on present value index calculated in Part 5, the proposals should be ranked as follows:
8.
Proposal D:
The analysis indicates that although Proposal D has the larger net present value, it is not as attractive as