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Hampton Landscaping

Price: $2.50


part 1 (a and b) only
The capital investment committee of Hampton Landscaping Company is considering two
investment projects. The estimated income from operations and net cash flows from
each investment are as follows:


Greenhouse SkidLoader
Year Income from operations Net cash flow Income from operationgs Net cash flow
1  22,200  35,000  7,200  20,000
2  12,200  25,000  7,200  20,000
3  7,200  20,000  7,200  20,000
4  (2,800)  10,000  7,200  20,000
5  (2,800)  10,000  7,200  20,000
 36,000  100,000  36,000  100,000

Each project requires an investment of $64,000. Straight-line depreciation will be used,
and no residual value is expected. The committee has selected a rate of 15% for purposes

of the net present value analysis.

Instructions
1. Compute the following:
a. The average rate of return for each investment. Round to one decimal place.
b. The net present value for each investment. Use the present value of $1 table
appearing in this chapter.

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