(Solution) - The management of Horizon Media Inc is considering two capital -(2025 Original AI-Free Solution)

Paper Details

The management of Horizon Media Inc. is considering two capital investment projects. The estimated net cash flows from each project are as follows:

The radio station requires an investment of $456,800, while the TV station requires an investment of $1,366,650. No residual value is expected from either project.

Instructions
1. Compute the following for each project:
a. The net present value. Use a rate of 10% and the present value of an annuity of $1 table appearing in this chapter.
b. A present value index. Round to two decimal places.
2. Determine the internal rate of return for each project by (a) computing a present value factor for an annuity of $1 and (b) using the present value of an annuity of $1 table appearing in this chapter.
3. What advantage does the internal rate of return method have over the net present value method in comparingprojects?