1) Assume the following information for three investment proposals: ...
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Accounting
1) Assume the following information for three investment proposals:
Proposal A
Proposal B
Proposal C
Investment required
$
(200,000
)
$
(255,000
)
$
(350,000
)
Present value of cash inflows
220,000
315,000
420,000
Net present value
$
20,000
$
60,000
$
70,000
Based on the profitability index, which of the following statements is true?
Proposal C is preferable to Proposal B
Proposal A is preferable to Proposal C
Proposal A is preferable to Proposal B
Proposal B is the highest ranked proposal among the three choices.
2) Assume that a company is considering purchasing a machine for $50,000 that will have a five-year useful life and no salvage value. The machine will lower operating costs by $17,000 per year. The internal rate of return on this investment is closest to:
19%.
21%.
23%.
24%.
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