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Category > Business & Finance Posted 09 May 2017 My Price 9.00

Henkel Company is considering three long-term

Henkel Company is considering three long-term capital investment proposals. Each investment has a useful life of 5 years. Relevant data on each project are as follows.

      Project Kilo   Project Lima Project Oscar  
Capital investment     $158,100   $168,300   $210,600  
Annual net income:              
Year 1   13,260   17,850   28,050  
  2   13,260   16,830   22,950  
  3   13,260   15,810   21,930  
  4   13,260   11,730   13,770  
  5   13,260   8,670   12,750  
Total   $66,300   $70,890   $99,450  

EAT_13173864087850_29403275033753284.JPG

EAT_13173864087850_6892113259909424.JPG

Depreciation is computed by the straight-line method with no salvage value. The company’s cost of capital is 15%.

Compute the net present value for each project. (Round answers to 0 decimal places, e.g. 125. If the net present value is negative, use either a negative sign preceding the number eg -45 or parentheses eg (45). Round Discount Factor to 5 decimal places.)

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  • AnonymousAnonymous answered this 8 minutes laterEdit Delete279 answers• 100% Best Answer
    Statement showing calculation of NPV   Project Kilo Project Lima Project Oscar
    Particulars Time PVF@10% Amount PV Amount PV Amount PV
    Initial Investment 0.00 1.0000 (158,100.00) (158,100.00) (168,300.00) (168,300.00) (210,600.00) (210,600.00)
    PV of Cash Outflows       (158,100.00)   (168,300.00)   (210,600.00)
    Cash Inflows 1.00 0.8696 13,260.00 11,530.43 17,850.00 15,521.74 28,050.00 24,391.30
    Cash Inflows 2.00 0.7561 13,260.00 10,026.47 16,830.00 12,725.90 22,950.00 17,353.50
    Cash Inflows 3.00 0.6575 13,260.00 8,718.67 15,810.00 10,395.33 21,930.00 14,419.33
    Cash Inflows 4.00 0.5718 13,260.00 7,581.45 11,730.00 6,706.67 13,770.00 7,873.04
    Cash Inflows 5.00 0.4972 13,260.00 6,592.56 8,670.00 4,310.52 12,750.00 6,339.00
    PV of Cash Inflows       44,449.58   49,660.16   70,376.18
    NPV     (113,650.42)   (118,639.84)   (140,223.82)
                     
                     
    Time PVF Working Notes            
    1.00 0.8696 1/1.15            
    2.00 0.7561 .8696/1.15            
    3.00 0.6575 .7561/1.15            
    4.00 0.5718 .6575/1.15            
    5.00 0.4972 .5718/1.15            
                     
    Note: Tax Rate is not given. Thus tax savings on depreciation ignored for computing PV of cash inflows

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Status NEW Posted 09 May 2017 03:05 PM My Price 9.00

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