Devry ACCT346 Week 7 Assignment
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DeVry University |
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ACCT346 Weekly Assignment |
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Week 7 |
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Directions: Your assignment this week is to answer the four questions below. Please note that Question #1 has 2 parts, Part A and Part B. Please show your work for full credit and use the box provided. Please add more rows or columns to the box if needed. |
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1. Gomez Corporation is considering two alternative investment proposals with the following data: |
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Proposal X |
Proposal Y |
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Investment |
$8,50,000 |
$4,68,000 |
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Useful life |
8 years |
8 years |
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Estimated annual net |
$1,25,000 |
$78,000 |
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cash inflows for 8 years |
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Residual value |
$40,000 |
$ - |
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Depreciation method |
Straight-line |
Straight-line |
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Required rate of return |
14% |
10% |
1a. How long is the payback period for Proposal X?
1b. What is the accounting rate of return for Proposal Y?
2. You have been awarded a scholarship that will pay you $500 per semester at the end of each of the next 8 semesters that you earn a GPA of 3.5 or better. You are a very serious student and you anticipate receiving the scholarship every semester. Using a discount rate of 3% per semester, which of the following is the correct calculation for determining the present value of the scholarship? PLEASE STATE WHY YOU CHOSE THE ANSWER THAT YOU DID.
A) PV = $500 × 3% × 8
B) PV = $500 × (Annuity PV factor, i = 3%, n = 8)
C) PV = $500 × (Annuity FV factor, i = 6%, n = 4)
D) PV = $1,000 × (PV factor, i = 3%, n = 4)
3. Maersk Metal Stamping is analyzing a special investment project. The project will require the purchase of two machines for $30,000 and $8,000 (both machines are required). The total residual value at the end of the project is $1,500. The project will generate cash inflows of $11,000 per year over its 8-year life.
If Maersk requires a 6% return, what is the net present value (NPV) of this project? (Use present value tables or Excel.)
4. Hincapie Manufacturing is evaluating investing in a new metal stamping machine costing $30,924. Hincapie estimates that it will realize $12,000 in annual cash inflows for each year of the machine's 3-year useful life.
Approximately, what is the the internal rate of return (IRR) for the machine? (Use present value tables or Excel.)
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Solution: Devry ACCT346 Week 7 Assignment