Redmond Company Is Considering Investing in One of the Following $\quad$

question 30

Essay

Redmond Company is considering investing in one of the following two projects:
$\quad$$\quad$$\quad$$\quad$$\text { Annual Cash Inflows }$
$\begin{array}{|c|c|c|c|c|}\hline \text { Year }&\text { Project A } &\text { Project B } \\\hline 1 & \$ 2,000 &\$ 4,000 \\\hline 2 & 3,000 & & 2,000 \\\hline 3 & 3,000 & & 2,000 \\\hline 4 & 1,000 & & 1,000 \\\hline \text {Total} & \$ 9,000 & \$ 9,000 \\\hline\end{array}$
(PV of $1 and PVA of $1)(Use appropriate factor(s)from the tables provided.)
Required:
1)Which project is more desirable strictly in terms of cash inflows? Why?
2)Compute the present value of each project's cash inflows assuming the company's required rate of return is 12%.
3)What is the maximum amount Redmond should be willing to pay for each project?
4)Suppose each project costs $7,000.Which project(s)should be accepted? Note that only one project can be accepted.

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Definitions:

Core Countries

Nations that dominate global trade and economics, characterized by high levels of industrialization and a well-developed infrastructure.

Global Stratification

The hierarchical arrangement and classification of societies or countries based on indicators such as wealth, economic status, access to resources, and power.

Fertility Rates

The average number of children that would be born to a woman over her lifetime, based on current age-specific fertility rates.

Societal Burden

A term that describes the overall impact of social problems, including economic costs and negative effects on well-being, on a community or society.