A Firm Has Three Independent Projects Under Consideration Each with a Required

question 27

Essay

A firm has three independent projects under consideration each with a required rate of return of 10%/ The total projects budget is only $2,000.Project X has an initial investment of $2,000 and a single cash flow in year one of $2,360.Project Y has an initial investment of $1,000 and a single cash flow in year one of $1,200.Project Z has an initial investment of $1,000 and a single cash flow in year one of $1,170.Calculate the IRR and NPV for each of these projects.If we assume that we cannot "repeat" these projects (i.e.,we cannot do project Z twice)which project or combination of projects should the firm undertake? Why?

Recognize and account for gains or losses on disposal of assets.

Understand the concept and accounting treatment of asset impairment.

Determine the impact of depreciation and asset disposal on financial statements.

Understand how changes in depreciation methods or estimates affect financial statements.