Phoenlx Company can Invest In each of three cheese-making projects: C1, C2, and
ID: 2400842 • Letter: P
Question
Phoenlx Company can Invest In each of three cheese-making projects: C1, C2, and C3. Each project requlres an Initial Investment of $270,000 and would yleld the following annual cash flows. (PV of $1. FV of $1. PVA of $1, and FVA of $1) (Use approprlate factorls) from the tables provided.) Year 1 Year 2 Year 3 Totals $26,eee 122,888 182,808 $338,eee $116 , eee 116,888 116,808 $338 , ?? $194 , eee 74,808 62,868 $338,800 (1) Assume that the company requires a 10% return from its Investments. Using net present value, determine which projects, f any, should be acquired. (Negative net present values should be Indicated with a minus sign. Round your answers to the nearest whole dollar.) Initial Investment Values are Based on: ash Inflow | x | PV Factor | = | Present Value Initial Investment ash Inflow | x | PV Factor | = | Present Value Initial Investment Year Cash Inflow | x | PV Factor | = | Present ValueExplanation / Answer
Project C1
Initial Investment
270000
Chart Values are based on:
I =
10%
Year
Cash Inflow
X
PV Factor
=
Present Value
1
26000
0.909
=
23634
2
122000
0.826
=
100772
3
182000
0.751
=
136682
261088
Initial Investment
270000
Net Present Value
(8912)
Project C2
Initial Investment
270000
Chart Values are based on:
I =
10%
Year
Cash Inflow
X
PV Factor
=
Present Value
1
110000
0.909
=
99990
2
110000
0.826
=
90860
3
110000
0.751
=
82610
273460
Initial Investment
270000
Net Present Value
3460
Project C3
Initial Investment
270000
Chart Values are based on:
I =
10%
Year
Cash Inflow
X
PV Factor
=
Present Value
1
194000
0.909
=
176346
2
74000
0.826
=
61124
3
62000
0.751
=
46562
284032
Initial Investment
270000
Net Present Value
14032
Project C2 and C3 should be accepted as it provides positive NPV and Project C1 should be avoided because it provides negative NPV.
Project C1
Initial Investment
270000
Chart Values are based on:
I =
10%
Year
Cash Inflow
X
PV Factor
=
Present Value
1
26000
0.909
=
23634
2
122000
0.826
=
100772
3
182000
0.751
=
136682
261088
Initial Investment
270000
Net Present Value
(8912)