Consider the following cash flows for two mutually exclusive capital investment projects. The required rate of return is 16%. Use this information for the next 3 questions. Year Project A Cash Flow Project B Cash Flow ($50,000) ($20,000) 15,000 6,000 15,000 6,000 3 15,000 6,000 4 13,500 5,400 13,500 5,400 6,750 5,400 Calculate the net present value of project A. $1,564.25 $342.28 $1,245.11 $2,709,21 $3,802

Consider the following cash flows for two mutually exclusive capital investment projects. The required rate of return is 16%. Use this information for the next 3 questions. Year Project A Cash Flow Project B Cash Flow ($50,000) ($20,000) 15,000 6,000 15,000 6,000 3 15,000 6,000 4 13,500 5,400 13,500 5,400 6,750 5,400 Calculate the net present value of project A. $1,564.25 $342.28 $1,245.11 $2,709,21 $3,802

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter12: Capital Budgeting: Decision Criteria

Section: Chapter Questions

Problem 7P: Your division is considering two investment projects, each of which requires an up-front expenditure...

See similar textbooks

Similar questions

Project S has a cost of $10,000 and is expected to produce benefits (cash flows) of $3,000 per year for 5 years. Project L costs $25,000 and is expected to produce cash flows of $7,400 per year for 5 years. Calculate the two projects’ NPVs, IRRs, MIRRs, and PIs, assuming a cost of capital of 12%. Which project would be selected, assuming they are mutually exclusive, using each ranking method? Which should actually be selected?
Consider the following cash flows for two mutually exclusive capital investment projects. The required rate of return is 16%. Use this information for the next 3 questions. Year Project A Cash Flow Project B Cash Flow ($50,000) ($20,000) 15,000 6,000 15,000 6,000 3 15,000 6,000 4 13,500 5,400 13,500 5,400 6,750 5,400
Consider the following cash flows for two mutually exclusive capital investment projects. The required rate of return is 16%. Use this information for the next 3 questions. Year Project A Cash Flow Project B Cash Flow ($50,000) ($20,000) 1 15,000 6,000 15,000 6,000 15,000 6,000 4 13,500 5,400 13,500 5,400 6,750 5,400 What is the profitability index of project B? 1.03 1.06 .94 1.01 1.09
The following are the cash flows of two projects: Project B Year Project A $ (300) 0 $ (300) 1 180 200 2 180 200 3 180 200 4 180 If the opportunity cost of capital is 12%, what is the profitability index for each project? Note: Do not round intermediate calculations. Round your answers to 4 decimal places. Project A B Profitability Index
Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 –$ 491,000 –$ 92,000 1 114,000 52,000 2 134,000 36,000 3 79,000 33,500 4 474,000 28,600 Whichever project you choose, if any, you require a 15% return on your investment. What is the IRR for each project? (Round the final answers to 2 decimal places.) If you apply the IRR criterion, which investment will you choose? Project A Project B What is the profitability index for each project? (Do not round intermediate calculation. Round the final answers to 3 decimal places.) Project A Project B If you apply the profitability index criterion, which investment will you choose? Project A Project B Based on your answers in (a) through (e), which project will you finally choose? Project A Project B
A project has the following cash flows set out below. What is the profitability index of this project if the relevant discount rate is 2 percent? Enter your final answer to two decimal places. Year Cash flow 0 -1,745 1 537 2 2,066 3 3,912
Two mutually exclusive investment projects have the following forecasted cash flows: Year A B 0 -$20,000 -$20,000 1 +11,000 0 2 +11,000 0 3 +11,000 0 4 +11,000 +55,000 Use Table II and Table IV to answer the questions. Compute the internal rate of return for each project. Round your answers to one decimal place.IRRA: % IRRB: % Compute the net present value for each project if the firm has a 10 percent cost of capital. Round your answers to the nearest dollar.NPVA: $ NPVB: $ Which project should be adopted? Why? should be chosen because it has the higher . It is assumed that the firm's reinvestment opportunities are more accurately represented by the .
Two mutually exclusive investment projects have the following forecasted cash flows: Year A B 0 -$25,000 -$25,000 1 +10,000 0 2 +10,000 0 3 +10,000 0 4 +10,000 +50,000 Use Table II and Table IV to answer the questions. Compute the internal rate of return for each project. Round your answers to one decimal place.IRRA: % IRRB: % Compute the net present value for each project if the firm has a 9 percent cost of capital. Round your answers to the nearest dollar.NPVA: $ NPVB: $ Which project should be adopted? Why?should be chosen because it has the higher . It is assumed that the firm's reinvestment opportunities are more accurately represented by the .
The following are the cash flows of two projects: Year Project A Project B 0 $ (200) $ (200) 1 80 100 2 80 100 3 80 100 4 80 If the opportunity cost of capital is 11%, what is the profitability index for each project Note: Do not round intermediate calculations. Round your answers to 4 decimal places.
Refer to two projects with the following cash flows: Project A -$150 65 65 65 65 Year e Project B -$150 75 75 75 If the opportunity cost of capital is 8%, what is the profitability index for each project? (Round your answers to 4 decimal places.) Project A Project B Does the profitability index rank the projects A and B correctly? (Click to select)
You are given the following cash flows for a project. Assuming a cost of capital of 12.84 percent. determine the profitability index for this project. Year 0 1 2 3 4 5 O 14981 O 1.68/7 O1.7508 1.6245 1.5613 Cash Flow -$1,115.00 $554.00 $622.00 $648 00 $426.00 $216.00
Finance Here are the expected cash flows for three projects: Cash Flows (dollars) 1 2 0 5,800 - 1,800 + 1,200 + 1,200 0 + 1,800 - 5,800 + 1,200 + 1,200 Project Year: A B с 3 + 3,400 + 2,400 + 3,400 4 0 + 3,400 + 5,400 a. What is the payback period on each of the projects? b. If you use the payback rule with a cutoff period of 2 years, which projects will you accept? c. If you use a cutoff period of 3 years, which projects will you accept? d-1. If the opportunity cost of capital is 10%, calculate the NPV for projects A, B, and C. (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to 2 decimal places.) d-2. Which projects have positive NPVs? e. "Payback gives too much weight to cash flows that occur after the cutoff date." True or false? a. Payback period b. If you use the payback rule with a cutoff period of 2 years, which projects will you accept? C. If you use a cutoff period of 3 years, which projects will you accept?…