Accounting Information Systems 1st Edition by Vernon Richardson,Chengyee Chang ,Rod Smith

تمرين 23

Sunset Graphics is considering two mutually exclusive projects. Both require an initial investment of $100,000. Assume a marginal interest rate of 10 percent and no residual value for either investment. The cash flows for the two projects are expected to be the following:

a. Compute the NPV, payback, and IRR for both projects. Which is most desirable?
b. Assume straight-line depreciation is used for both projects; compute the accounting rate of return. What do you think of the ARR criterion?
c. Assume a change in interest rate to 15 percent. Does that change your views on which project the company should adopt?
d. Assume a change in interest rate to 6 percent. Does that change your views on which project the company should adopt?
e. For investments in technology, which cash inflow projection is most likely?