# Acc350 Managerial Accounting: E26-24 Use the NPV method to determine whether Kyler Products

Acc350 Managerial Accounting

E26-24 Using NPV and profitability index to make capital investment decisions

Use the NPV method to determine whether Kyler Products should invest in the following projects:

Project A: Costs $260,000 and offers seven annual net cash inflows of $57,000. Kyler Products requires an annual return of 16% on investments of this nature.

Project B: Costs $375,000 and offers 10 annual net cash inflows of $75,000. Kyler Products demands an annual return of 14% on investments of this nature.

Requirements

1. What is the NPV of each project? Assume neither project has a residual value. Round to two decimal places.

2. What is the maximum acceptable price to pay for each project?

3. What is the profitability index of each project? Round to two decimal places.

E26-24 Using NPV and profitability index to make capital investment decisions

Use the NPV method to determine whether Kyler Products should invest in the following projects:

Project A: Costs $260,000 and offers seven annual net cash inflows of $57,000. Kyler Products requires an annual return of 16% on investments of this nature.

Project B: Costs $375,000 and offers 10 annual net cash inflows of $75,000. Kyler Products demands an annual return of 14% on investments of this nature.

Requirements

1. What is the NPV of each project? Assume neither project has a residual value. Round to two decimal places.

2. What is the maximum acceptable price to pay for each project?

3. What is the profitability index of each project? Round to two decimal places.

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