Presentation is loading. Please wait.

Presentation is loading. Please wait.

Chapter 26 Capital Investment Decisions Demonstration Problems © 2016 Pearson Education, Inc.26-1.

Published byAgnes Copeland Modified over 8 years ago

Similar presentations

Presentation on theme: "Chapter 26 Capital Investment Decisions Demonstration Problems © 2016 Pearson Education, Inc.26-1."— Presentation transcript:

1 Chapter 26 Capital Investment Decisions Demonstration Problems © 2016 Pearson Education, Inc.26-1

2 E26-19 Rapp Hardware is adding a new product line that will require an investment of $1,418,000. Managers estimate that this investment will have a 10-year life and generate net cash inflows of $310,000 the first year, $290,000 the second year, and $250,000 each year thereafter for eight years. Compute the payback period. Round to one decimal place. © 2016 Pearson Education, Inc.26-2

3 E26-19 © 2016 Pearson Education, Inc.26-3

4 E26-19 © 2016 Pearson Education, Inc.26-4

5 E26-19 © 2016 Pearson Education, Inc.26-5

6 E26-19 © 2016 Pearson Education, Inc.26-6

7 E26-19 © 2016 Pearson Education, Inc.26-7

8 E26-19 © 2016 Pearson Education, Inc.26-8

9 E26-19 © 2016 Pearson Education, Inc.26-9

10 E26-19 © 2016 Pearson Education, Inc.26-10

11 E26-19 © 2016 Pearson Education, Inc.26-11

12 E26-19 © 2016 Pearson Education, Inc.26-12

13 E26-19 © 2016 Pearson Education, Inc.26-13

14 E26-19 © 2016 Pearson Education, Inc.26-14

15 E26-19 © 2016 Pearson Education, Inc.26-15

16 E26-19 © 2016 Pearson Education, Inc.26-16

17 E26-19 © 2016 Pearson Education, Inc.26-17

18 E26-19 © 2016 Pearson Education, Inc.26-18

19 E26-19 © 2016 Pearson Education, Inc.26-19

20 E26-24 Use the NPV method to determine whether Juda Products should invest in the following projects: Project A: Costs $290,000 and offers seven annual net cash inflows of $57,000. Juda Products requires an annual return of 14% on investments of this nature. Project B: Costs $395,000 and offers 10 annual net cash inflows of $70,000. Juda Products demands an annual return of 14% on investments of this nature. Requirements 1.What is the NPV of each project? Assume neither project has a residual value. Round to two decimal places. 1.What is the maximum acceptable price to pay for each project? 1.What is the profitability index of each project? Round to two decimal places. © 2016 Pearson Education, Inc.26-20

21 E26-24 Requirement 1: What is the NPV of each project? Assume neither project has a residual value. Round to two decimal places. © 2016 Pearson Education, Inc.26-21

22 E26-24 Requirement 1: What is the NPV of each project? Assume neither project has a residual value. Round to two decimal places. © 2016 Pearson Education, Inc.26-22

23 E26-24 Requirement 1: What is the NPV of each project? Assume neither project has a residual value. Round to two decimal places. © 2016 Pearson Education, Inc.26-23

24 E26-24 Requirement 1: What is the NPV of each project? Assume neither project has a residual value. Round to two decimal places. © 2016 Pearson Education, Inc.26-24

25 E26-24 Requirement 1: What is the NPV of each project? Assume neither project has a residual value. Round to two decimal places. © 2016 Pearson Education, Inc.26-25

26 E26-24 Requirement 1: What is the NPV of each project? Assume neither project has a residual value. Round to two decimal places. © 2016 Pearson Education, Inc.26-26

27 E26-24 Requirement 1: What is the NPV of each project? Assume neither project has a residual value. Round to two decimal places. © 2016 Pearson Education, Inc.26-27

28 E26-24 Requirement 1: What is the NPV of each project? Assume neither project has a residual value. Round to two decimal places. © 2016 Pearson Education, Inc.26-28

29 E26-24 Requirement 2: What is the maximum acceptable price to pay for each project? © 2016 Pearson Education, Inc.26-29

30 E26-24 Requirement 2: What is the maximum acceptable price to pay for each project? The maximum acceptable price to pay is $244,416 for Project A and $395,500 for project B (the total present value of net cash inflows from each project, calculated in Requirement 1). © 2016 Pearson Education, Inc.26-30

31 E26-24 Requirement 3: What is the profitability index of each project? Round to two decimal places. © 2016 Pearson Education, Inc.26-31

32 E26-24 Requirement 3: What is the profitability index of each project? Round to two decimal places. © 2016 Pearson Education, Inc.26-32

33 E26-24 Requirement 3: What is the profitability index of each project? Round to two decimal places. © 2016 Pearson Education, Inc.26-33

34 E26-24 Requirement 3: What is the profitability index of each project? Round to two decimal places. © 2016 Pearson Education, Inc.26-34

35 End of Chapter 26 © 2016 Pearson Education, Inc.26-35

Download ppt "Chapter 26 Capital Investment Decisions Demonstration Problems © 2016 Pearson Education, Inc.26-1."

Similar presentations

Net Present Value and Other Investment Criteria

Net Present Value and Other Investment Criteria
Chapter 9. Capital Budgeting: the process of planning for purchases of long- term assets. n example: Suppose our firm must decide whether to purchase.

Chapter 9. Capital Budgeting: the process of planning for purchases of long- term assets. n example: Suppose our firm must decide whether to purchase.
Copyright © 2003 Pearson Education, Inc. Slide 9-0 Chapter 9 Capital Budgeting Techniques.

Copyright © 2003 Pearson Education, Inc. Slide 9-0 Chapter 9 Capital Budgeting Techniques.
McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies,

McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies,
9-0 Chapter 9: Outline Net Present Value The Payback Rule The Discounted Payback The Average Accounting Return The Internal Rate of Return The Profitability.

9-0 Chapter 9: Outline Net Present Value The Payback Rule The Discounted Payback The Average Accounting Return The Internal Rate of Return The Profitability.
Capital Budgeting1 Select investments which increase value of firm Maximize wealth of shareholders Important to firm’s long-term success  Substantial.

Capital Budgeting1 Select investments which increase value of firm Maximize wealth of shareholders Important to firm’s long-term success  Substantial.
Capital Investment Decisions

Capital Investment Decisions
Capital Budgeting Decisions

Capital Budgeting Decisions
Capital Investment Analysis

Capital Investment Analysis
© The McGraw-Hill Companies, Inc.,2001 6- 1 Irwin/McGraw-Hill Chapter 6 Fundamentals of Corporate Finance Third Edition Net Present Value and Other Investment.

© The McGraw-Hill Companies, Inc., Irwin/McGraw-Hill Chapter 6 Fundamentals of Corporate Finance Third Edition Net Present Value and Other Investment.
Chapter 14. Capital Investments Long Term in nature covering many years Large amounts of capital Investments are not easily or quickly disposed Critical.

Chapter 14. Capital Investments Long Term in nature covering many years Large amounts of capital Investments are not easily or quickly disposed Critical.
CAPITAL BUDGETING TECHNIQUES

CAPITAL BUDGETING TECHNIQUES
Chapter 9 Net Present Value and Other Investment Criteria

Chapter 9 Net Present Value and Other Investment Criteria
McGraw-Hill/Irwin Corporate Finance, 7/e © 2005 The McGraw-Hill Companies, Inc. All Rights Reserved. 6-0 CHAPTER 6 Some Alternative Investment Rules.

McGraw-Hill/Irwin Corporate Finance, 7/e © 2005 The McGraw-Hill Companies, Inc. All Rights Reserved. 6-0 CHAPTER 6 Some Alternative Investment Rules.
Net Present Value and Other Investment Criteria

Net Present Value and Other Investment Criteria
The Student Handbook to T HE A PPRAISAL OF R EAL E STATE 1 Chapter 24 Discounted Cash Flow Analysis and Special Applications in Income Capitalization.

The Student Handbook to T HE A PPRAISAL OF R EAL E STATE 1 Chapter 24 Discounted Cash Flow Analysis and Special Applications in Income Capitalization.
1 © 2012 John Wiley & Sons, Ltd, Accounting for Managers, 4th edition, 9781119979678 Chapter 14 Strategic Investment Decisions.

1 © 2012 John Wiley & Sons, Ltd, Accounting for Managers, 4th edition, Chapter 14 Strategic Investment Decisions.
McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter 12 Planning Investments: Capital Budgeting.

McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter 12 Planning Investments: Capital Budgeting.
Chapter 10 Capital Budgeting Techniques. 2 Bennett Company is a medium sized metal fabricator that is currently contemplating two projects: Project A.

Chapter 10 Capital Budgeting Techniques. 2 Bennett Company is a medium sized metal fabricator that is currently contemplating two projects: Project A.
PowerPoint Authors: Susan Coomer Galbreath, Ph.D., CPA Charles W. Caldwell, D.B.A., CMA Jon A. Booker, Ph.D., CPA, CIA Cynthia J. Rooney, Ph.D., CPA Copyright.

PowerPoint Authors: Susan Coomer Galbreath, Ph.D., CPA Charles W. Caldwell, D.B.A., CMA Jon A. Booker, Ph.D., CPA, CIA Cynthia J. Rooney, Ph.D., CPA Copyright.

Similar presentations

Ads by Google