Problem - Capital Budgeting
Howell Company has the following information:
|
|
Project 1
|
Project 2
|
Project3
|
|
Number of years
|
5
|
10
|
15
|
|
Amount of annual cash inflow
|
$10,000.00
|
B
|
$5,000.00
|
|
Required initial investment
|
A
|
$30,000.00
|
$32,000.00
|
|
Minimum desired rate of return
|
8%
|
12%
|
8%
|
|
Net present value
|
$0
|
$3,901.20
|
C
|
Given:
Present value factor for an ordinary annuity at 8% and 5 periods 3.9927
Present value factor for an ordinary annuity at 8% and 15 periods 8.5595
Present value factor for an ordinary annuity at 12% and 10 periods 5.6502
Present value of one at 8% and 5 periods 0.6806
Present value of one at 8% and 15 periods 0.3152
Present value of one at 12% and 10 periods 0.3220
Required - Determine the missing amounts. Ignore income taxes.