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Colin is analyzing a 3-year project that has an initial cost of $199,800. This cost will be depreciated straight-line to zero over three years. The projected annual net income for the three years is $11,600, $15,900, and $17,200. If the discount rate is 12 percent, what is the average accounting rate of return?

Project A has cash flows of –$74,900, $18,400, $26,300, and $57,100 for Years 0 to 3, respectively. Project B has cash flows of –$79,000, $18,400, $22,700, and $51,500 for Years 0 to 3, respectively. Both projects are independent, have multiple noncash expenses, and use straight-line depreciation to a zero balance over the project’s life. Neither project has any salvage value. Both projects have a required accounting return of 11.5 percent. Should you accept or reject these projects based on the average accounting return?

Projects A and B are mutually exclusive and have an initial cost of $78,000 each. Project A has annual cash flows for Years 1 to 3 of $28,300, $31,500, and $22,300, respectively. Project B has annual cash flows for Year 1 of $36,900 and $40,500 for Year 2. What is the crossover rate?

A project has an initial cost of $18,400 and expected cash inflows of $7,200, $8,900, and $7,500 over Years 1 to 3, respectively. What is the discounted payback period if the required rate of return is 11.2 percent?

Project A costs $47,800 with cash inflows of $34,200 in Year 1 and $28,700 in Year 2. Project B costs $63,200 with cash inflows of $21,900 in Year 1 and $59,200 in Year 2. These projects are independent and have an assigned discount rate of 15 percent. Based on the profitability index, what is your recommendation concerning these projects?

If a firm experiences _____, it makes sense to offer a longer credit period to customers.

In a booming economy, the stock of Pattee Productions is expected to return 17 percent. It is expected to return 9 percent in a normal economy and will decline 18 percent in a recessionary economy. The probability of a recession is 18 percent while the probability of a boom is 22 percent. What is the standard deviation of the returns on this stock?

The Whey Station is considering a project with an initial cost of $146,500 and cash inflows for Years 1 to 3 of $56,700, $68,500, and $71,200, respectively. What is the IRR?

The company places orders each quarter that are 56 percent of next quarter’s sales and has a 30-day payables period. The projected sales for next year are: Q1 Q2 Q3 Q4 Sales $ 54,225 $ 60,975 $ 69,525 $ 75,050 What is the accounts payable balance at the end of the second quarter?

A project produces annual net income amounts of $8,200, $17,800, and $20,900 over its 3-year life. The initial cost is $198,900, which is depreciated straight-line to a zero book value over three years. What is the average accounting rate of return if the required discount rate is 14.5 percent?