Riley Enterprises and Lane Industries both have new projects that require an initial investment of $130,000 and will have annual cash inflows of $45,000. If Riley expects their project to last five years and Lane expects their project to last eight years, which one has the higher internal rate of return factor? The IRR factor cannot be determined with this data. Lane Industries Riley Enterprises The IRR factor will be the same for both companies.
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- Consider two investment projects, which both require an upfront investment of $9 million, and both of which pay a constant positive amount each year for the next 9 years. Under what conditions can you rank these projects by comparing their IRRS? (Select the best choice below.) O A. There are no conditions under which you can use the IRR to rank projects. O B. Ranking by IRR will work in this case so long as the projects' cash flows do not decrease from year to year. O C. Ranking by IRR will work in this case so long as the projects' cash flows do not increase from year to year. O D. Ranking by IRR will work in this case so long as the projects have the same risk.Consider the following projects, X and Y where the firm can only choose one. Project X costs $1500 and has cash flows of $678, $652, $347, $111, $54, $16 in each of the next 6 years. Project Y also costs $1500, and generates cash flows of $738, $693, $405 for the next 3 years, respectively. WACC=11%.If it possible for conflicts to exist between the NPV and the IRR when independent projects are being evaluated? Explain your answer.Yokam Company is considering two alternative projects. Project 1 requires an initial investment of $400,000 and has a present value of cash flows of $1,100,000. Project 2 requires an initial investment of $4 million and has a present value of cash flows of $6 million. Compute the profitability index for each project. Based on the profitability index, which project should the company prefer? Explain.
- Yokam Company is considering two alternative projects. Project 1 requires an initial investment of $420,000 and has a present value of all its cash flows of $1,350,000. Project 2 requires an initial investment of $5 million and has a present value of all its cash flows of $6 million. (a) Compute the profitability index for each project.(b) Based on the profitability index, which project should the company select?Yokam Company is considering two alternative projects. Project 1 requires an initial investment of $400,000 and has a present value of cash flows of $1,100,000. Project 2 requires an initial investment of $4,000,000 and has a present value of cash flows of $6,000,000. 1. Compute the profitability index for each project. 2. Based on the profitability index, which project should the company prefer? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Compute the profitability index for each project. Project 1 Project 2 Choose Numerator: Profitability Index T 7 Choose Denominator: 4 of 5 180 # Next > G OYokam Company is considering two alternative projects. Project 1 requires an initial investment of $470,000 and has a present value of all its cash flows of $2,350,000. Project 2 requires an initial investment of $5,000,000 and has a present value of all its cash flows of $6,000,000. (a) Compute the profitability index for each project. (b) Based on the profitability index, which project should the company select? Complete this question by entering your answers in the tabs below. Required A Required B Compute the profitability index for each project. Profitability Index Numerator: Denominator: Profitability Index = Profitability index Project 1 Project 2
- Connor Corporation is considering two projects (see below). For your analysis, assume these projects are mutually exclusive with a required rate of return of 12%. project 1 project 2 initial investment $(510,000) $(685,000) cash flow year 1 485,000 610,000 Compute the following for each project: NPV (net present value) PI (profitability index) IRR (internal rate of return) Based on your analysis, answer the following questions : Which is the best choice? Why? Which project should be selected and why? If the projects had the same IRR amounts but different NPV totals, then how would you know which project to select? Explain.Consider the following projects, X and Y where the firm can only choose one. Project X costs $600 and has cash flows of $400 in each of the next 2 years. Project Y also costs $600, and generates cash flows of $500 and $275 for the next 2 years, respectively. Which investment should the firm choose if the cost of capital is 15 percent? Project X, since it has a higher NPV than Project Y Project Y, since it has a higher NPV than Project X neither, since both the projects have negative NPV neither, since both the projects have positive NPVConsider the following projects, X and Y where the firm can only choose one. Project X costs $1500 and has cash flows of $678, $652, $347, $111, $54, $16 in each of the next 6 years. Project Y also costs $1500, and generates cash flows of $738, $693, $405 for the next 3 years, respectively. WACC=11%.Calculate the projects’ NPVs, IRRs, payback periods.
- Consider two investment projects, which both require an upfront investment of $8 million, and both of which pay a constant positive amount each year for the next 11 years. Under what conditions can you rank these projects by comparing their IRRs? (Select the best choice below.) A. Ranking by IRR will work in this case so long as the projects' cash flows do not increase from year to year. B. Ranking by IRR will work in this case so long as the projects have the same risk. C. There are no conditions under which you can use the IRR to rank projects. D. Ranking by IRR will work in this case so long as the projects' cash flows do not decrease from year to year.Tyler, Inc., is considering switching to a new production technology. The cost of the required equipment will be $3,529,783 . The discount rate is 13.99 percent. The cash flows that the firm expects the new technology to generate are as follows. a. Compute the payback and discounted payback periods for the project. b. What is the NPV for the project? Should the firm go ahead with the project? c. What is the IRR, and what would be the decision based on the IRR? Years CF 0 $(3,529,783) 1-2 0 3-5 $916,204 6-9 $1,590,056Praxis Corp. has to choose between two mutually exclusive projects. If it chooses project A, Praxis Corp. will have the opportunity to make a similar investment in three years. However, if it chooses project B, it will not have the opportunity to make a second investment. The following table lists the cash flows for these projects. If the firm uses the replacement chain (common life) approach, what will be the difference between the net present value (NPV) of project A and project B, assuming that both projects have a weighted average cost of capital of 13%? Cash Flow Project A Project B Year 0: –$17,500 Year 0: –$45,000 Year 1: 10,000 Year 1: 10,000 Year 2: 16,000 Year 2: 17,000 Year 3: 15,000 Year 3: 16,000 Year 4: 15,000 Year 5: 14,000 Year 6: 13,000 $9,656 $14,163 $10,944 $12,875 $10,300