Sophia sweeny the president of sweeny enterprises is

Reference no: EM13598807

Sophia Sweeny, the president of Sweeny Enterprises, is considering two investment opportunities. Because of limited resources she will be able to invest in only one of them. Project A is to purchase a machine that will enable factory automation: the machine is expected to have a useful life of four years and no salvage value. Project B supports a training program that will improve the skills of employees operating the current equipment. Initial cash expenditures for Project A are $300,000 and for Project A and $39,507 for Project B. Both investments are expected to provide cash flow benefits for the next four years. Sweeny Enterprise's cost of capitial is 8%.

Required

a. Compare the net present value of each project. Which project should be adopted based on the net present value approach?

b. Compute the approximate internal rate of return of each project. Which one should be adopted based on the interal rate of return approach?

c. Compare the net present value approach with the internal rate of return approach. Which method is better in the given circumstances? Why?

Reference no: EM13598807

Questions Cloud

Xz had an installment sales of 1000000 and cost of : xz had an installment sales of 1000000 and cost of installment sales of 700000 in 2010 .a 2010 sale resulted in

On dec 312008 xyz corp had 600000 shares of common stock : on dec 31.2008 xyz corp had 600000 shares of common stock and 300000 shares of 8 noncumulativenonconvertible prreferd

On january 1 2010 metco inc had issued an outstanding : on january 1 2010 metco inc. had issued an outstanding 574600 shares of 2 par value common stock. on march 15 2010

The following information provides the amount of cost : the following information provides the amount of cost incurred in may for the cost items indicated. during may 16000

Sophia sweeny the president of sweeny enterprises is : sophia sweeny the president of sweeny enterprises is considering two investment opportunities. because of limited

Quentin giordano owns a small retail ice cream parlor he is : quentin giordano owns a small retail ice cream parlor. he is considering expanding the business and has identified two

The collins corporation just started business in january of : the collins corporation just started business in january of 2007. they had no beginning inventories. during 2007 they

Six years ago in dissolution of partnership bee partner joe : six years ago in dissolution of partnership bee partner joe received his pro rata share of inventory items held for

Jerry is a partner in the bent grass partnership at the : jerry is a partner in the bent grass partnership. at the close of the current year jerrys basis in the partnership is

User Account

All Pages