accounting help 409619
Hot Air Highlights (HAH) is considering the purchase of two new hot air balloons so that it can expand its desert sunset tours. Various information about the proposed investment follows: (Use Table 2 &Table 4.)
| Initial investment (for two hot air balloons) | $ | 361,000 | |
| Useful life | 8 | years | |
| Salvage value | $ | 49,000 | |
| Annual net income generated | $ | 33,212 | |
| HAH’s cost of capital | 14 | % | |
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| Required: |
| Help HAH evaluate this project by calculating each of the following: |
| (a) |
Accounting rate of return. (Round your answer to 2 decimal places. Omit the “%” sign in your response.) Don't use plagiarized sources. Get Your Custom Essay on
accounting help 409619
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| Accounting rate of return | % |
| (b) | Payback period. (Round your answer to 2 decimal places.) |
| Payback period | years |
| (c) |
Net present value (NPV). (Negative amount should be indicated by a minus sign. Round your intermediate calculations to 4 decimal places and final answer to the nearest whole dollar amount. Omit the “$” sign in your response.) |
| Net present value | $ |
| (d) |
Recalculate the NPV assuming HAH’s cost of capital is 20 percent. (Negative amount should be indicated by a minus sign. Round your intermediate calculations to 4 decimal places and final answer to the nearest whole dollar amount. Omit the “$” sign in your response.) |
| Net present value | $ |
| Lancer Corp. has the following information available about a potential capital investment: |
| Initial investment | $ | 1,309,200 | |
| Annual net income | $ | 216,000 | |
| Expected life | 8 | years | |
| Salvage value | 352,000 | ||
| Lancer’s cost of capital | 10 | % | |
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9. value:
10.00 points
| Requirement 1: |
| Calculate the project’s net present value. (Round your intermediate calculations to 4 decimal places and round your final answer to the nearest whole dollar amount. Omit the “$” sign in your response.) |
| Net present value | $ |
check my workeBook Links (2)references
| Worksheet | Difficulty: Medium |
10. value:
10.00 points
| Requirement 3: |
| Calculate the net present value using a 17 percent discount rate. (Negative amount should be indicated by a minus sign. Round your intermediate calculations to 4 decimal places and final answer to the nearest whole dollar amount. Omit the “$” sign in your response.) |
| Net present value |
$ |
Midway Printing Co. is considering the purchase of new electronic printing equipment. It would allow Midway to increase its net income by $63,030 per year. Other information about this proposed project follows:
| Initial investment | $ | 330,000 | |
| Useful life | 7 | years | |
| Salvage value | $ | 92,000 | |
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11. value:
10.00 points
| Requirement 1: |
| Calculate the accounting rate of return for Midway. (Round your answer to 2 decimal places. Omit the “%” sign in your response.) |
| Accounting rate of return | % |
| Worksheet | Difficulty: Easy |
12. value:
10.00 points
| Requirement 2: |
| Calculate the payback period for Midway. (Round your answer to 2 decimal places.) |
| Payback period |
years |
value:
10.00 points
|
Dayton Corp has $2.00 million to invest in new projects. The company’s managers have presented a number of possible options that the board must prioritize. Information about the projects follows: |
| Project A | Project B | Project C | Project D | |||||
| Initial investment | $ | 560,000 | $ | 240,000 | $ | 800,000 | $ | 955,000 |
| Present value of future cash flows |
775,000 | 420,000 | 1,210,000 | 1,570,000 | ||||
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| Requirement 1: |
| Is Dayton able to invest in all of these projects simultaneously? |
| (Click to select)NoYes |
| Requirement 2: | |
| (a) |
Calculate the profitability index for each project. (Round your answers to 4 decimal places.) |
| Profitability Index | |
| Project A | |
| Project B | |
| Project C | |
| Project D | |
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| (b) |
In order of preference, rank the four projects in terms of profitability index for Dayton. |
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Project |
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First preference |
(Click to select)BDCA |
|
Second preference |
(Click to select)CBDA |
|
Third preference |
(Click to select)CADB |
|
Fourth preference |
(Click to select)ADCB |
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