BUSN 379 WEEK 4 Homework Assignment

BUSN 379 WEEK 4 Homework Assignment
Please complete the following exercises from Chapter 8 of your textbook and post them in the Dropbox
Chapter 8 3 4 5 and 6
3. 	Calculating Payback. Global Toys Inc., imposes a payback cutoff of three years for its international investment projects. If the company has the following two projects available, should it accept either of them?
Year 	Cash Flow (A) 	Cash Flow (B)
0 	−$55,000 	−$ 95,000
1 	    19,000 	     18,000
2 	    27,000 	     26,000
3 	    24,000 	     28,000
4 	      9,000 	   260,000
LO 2 	4. 	Calculating AAR. You’re trying to determine whether or not to expand your business by building a new manufacturing plant. The plant has an installation cost of $14 million, which will be depreciated straight-line to zero over its four-year life. If the plant has projected net income of $1,253,000, $1,935,000, $1,738,000, and $1,310,000 over these four years, what is the project- average accounting return (AAR)?

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LO 3 	5. 	Calculating IRR. A firm evaluates all of its projects by applying the IRR rule. If the required return is 11 percent, should the firm accept the following project?
Year 	Cash Flow
0 	−$153,000
1 	      78,000
2 	      67,000
3 	      49,000

figure
LO 4 	6. 	Calculating NPV. For the cash flows in the previous problem, suppose the firm uses the NPV decision rule. At a required return of 9 percent, should the firm accept this project? What if the required return was 21 percent?