The word document contains 2 questions.
The word document contains 2 questions.
1. Mimulus inc is considering a capital investment of $300,000 in additional productivities. The new machinery is expected to have a useful life of five years with no residual value . Depreciation is by the straight -line method. During the life of investment, annual profit and ca sh inflows are expected to be $30,000 and $90,000, respectively. Mimulus has a 15% cost of capital rate, which is the minimum acceptable rate of return on the investment. Instructions (round to two decimals) a). calculate (1) the annual rate of return, and (2) the cash payback period on the proposal capital expenditure. b). using the discounted cash flow technique, calculate the net present value. Check Figures: ▪ Part (a) (1): ARR = 20% ▪ Part (a) (2): Payback = 3.33 years ▪ Part (b): NPV = $1,694 2. calibrachoa crop. Is considering three capital expenditure projects. Relevant data for the projects is as follows: Project Investment Annual Income Life of project 22 $240,000 $13,300 6 years 23 270,000 19,000 9 years 24 288,000 18,400 8 years Annual income is constant over the life of the pr oject. Each project is expected to have zero residual value. Calibrachoa Crop. Uses the straight -line method of depreciation. Instructions a) Determine the internal rate of retu rn for each project. Round the internal rate of return fact or to three decimals. b) If calibrachoa Crop ’s minimum required rate of return is 10%, which projects are acceptable? Check Figure: ▪ Part (a): IRR: Project 22 = 8.5%; Project 23 = 11%; Project 24 = 10.5%




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