2. A firm is evaluating two projects. The firm's cost of capital (appropriate discount rate) has been determined to be 9%, and the projects have the following initial investments and cash flows: Project Q P 50 000 Project Y P 48 000 Initial Investment: Cash Flows: 1 P 20 000 P 30 000 2 25 000 35 000 3 15 000 40 000 4 20 000 10 000 Which project should the company pursue? Why

2. A firm is evaluating two projects. The firm's cost of capital (appropriate discount rate) has been determined to be 9%, and the projects have the following initial investments and cash flows: Project Q P 50 000 Project Y P 48 000 Initial Investment: Cash Flows: 1 P 20 000 P 30 000 2 25 000 35 000 3 15 000 40 000 4 20 000 10 000 Which project should the company pursue? Why

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 7P

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Start with the partial model in the file Ch10 P23 Build a Model.xlsx on the textbooks Web site. Gardial Fisheries is considering two mutually exclusive investments. The projects expected net cash flows are as follows: a. If each projects cost of capital is 12%, which project should be selected? If the cost of capital is 18%, what project is the proper choice? b. Construct NPV profiles for Projects A and B. c. What is each projects IRR? d. What is the crossover rate, and what is its significance? e. What is each projects MIRR at a cost of capital of 12%? At r = 18%? (Hint: Consider Period 7 as the end of Project Bs life.) f. What is the regular payback period for these two projects? g. At a cost of capital of 12%, what is the discounted payback period for these two projects? h. What is the profitability index for each project if the cost of capital is 12%?
Consider the following projects: Cash Flows ($) Project D E CO00 C101 -11,700 23,400 -21,700 37,975 Assume that the projects are mutually exclusive and that the opportunity cost of capital is 12%. a. Calculate the profitability index for each project. b-1. Calculate the profitability-index using the incremental cash flows. b-2. Which project should you choose?
3. Lopez Industries has identified the following two mutually exclusive capital investment projects: Year Project A Project B 0 1 2 3 4 -16000 400 800 13000 -15500 12500 8000 800 14000 800 What is the IRR for each of these projects? If you apply the IRR decision rule, which project should the company accept? Is this decision necessarily correct? If the required return is 11%, what is the NPV for each of these projects? Which project should the firm accept if they apply the NPV rule?
Compute the NPV statistic for Project Y. Explain whether or not the firm should accept or reject the project with the cash flows shown in the chart below if the appropriate cost of capital is 10%. Year 0 = -8,000, year 1 = 3,350, Year 2 = 4,180, Year 3 = 1,520, Year 4 = $300
Better plc is comparing two mutually exclusive projects, whose details are given below.The company’s cost of capital is 12 per cent.Project A Project B£m £mYear 0 (150) (152)Year 1 40 80Year 2 50 80Year 3 60 50Year 4 60 40Year 5 80 30(a). Using the net present value method, which project should be accepted?(b). Using the internal rate of return method, which project should be accepted?(c). If the cost of capital increases to 20 per cent in year 5, would your advice change? Hello.i have the solution you send me but i am trying to understand where did you get the calculations for in the worknotes tabel. I did my own calculation but i dont get the same answer. For example for year 2 for project A you have 39.8597 How did you get to that without using the formula in excel. I need to write down the actual numbers. I got 22.3214 some im not sure how you got to that number. Can you help me please? Thank you
2. A firm is evaluating two projects. The firm's cost of capital (appropriate discount rate) has been determined to be 9%, and the projects have the fllowing initial investments and cash flows: Project Q Project Y P 50 000 P 20 000 Initial Investment: P 48 000 Cash Flows: 1 P 30 000 2 25 000 35 000 3 15 000 40 000 4 20 000 10 000 Which project should the company pursue? Why?
Better plc is comparing two mutually exclusive projects, whose details are given below.The company’s cost of capital is 12 per cent.Project A Project B£m £mYear 0 (150) (152)Year 1 40 80Year 2 50 80Year 3 60 50Year 4 60 40Year 5 80 30(a). Using the net present value method, which project should be accepted?(b). Using the internal rate of return method, which project should be accepted?(c). If the cost of capital increases to 20 per cent in year 5, would your advice change? Hello.i have the solution you send me but i am trying to understand where did you get the calculations for in the worknotes tabel. I still cant calculate the IRR.i really dont understand how to do it. Can you help me please by using the numbers in the tabel so i can understand what is that you are adding or taking away please? I know how to calculate the NPV but not the IRR. I have went over and over this IRR but i still dont understand how you calculate it using the pv and the npv.i dont wanna use excel.
Better plc is comparing two mutually exclusive projects, whose details are given below.The company’s cost of capital is 12 per cent.Project A Project B£m £mYear 0 (150) (152)Year 1 40 80Year 2 50 80Year 3 60 50Year 4 60 40Year 5 80 30(a). Using the net present value method, which project should be accepted?(b). Using the internal rate of return method, which project should be accepted?(c). If the cost of capital increases to 20 per cent in year 5, would your advice change? Hello.i have the solution you send me but i am trying to understand where did you get the calculations for in the worknotes tabel. I still cant calculate the IRR.i really dont understand how to do it. Can you help me please by using the numbers in the tabel so i can understand what is that you are adding or taking away please? I know how to calculate the NPV but not the IRR
Better plc is comparing two mutually exclusive projects, whose details are given below.The company’s cost of capital is 12 per cent.Project A Project B£m £mYear 0 (150) (152)Year 1 40 80Year 2 50 80Year 3 60 50Year 4 60 40Year 5 80 30(a). Using the net present value method, which project should be accepted?(b). Using the internal rate of return method, which project should be accepted?(c). If the cost of capital increases to 20 per cent in year 5, would your advice change?
Better plc is comparing two mutually exclusive projects, whose details are given below.The company’s cost of capital is 12 per cent.Project A Project B£m £mYear 0 (150) (152)Year 1 40 80Year 2 50 80Year 3 60 50Year 4 60 40Year 5 80 30(a). Using the net present value method, which project should be accepted?(b). Using the internal rate of return method, which project should be accepted?(c). If the cost of capital increases to 20 per cent in year 5, would your advice change? Hello.i have the solution you send me but i am trying to understand where did you get the calculations for in the worknotes tabel. I did my own calculation but i dont get the same answer. Could you show mw the calculation but not in excel please, i need the calculation by formula manually
The cash flows associated with an investment project are as follows: Project Y (200 000) Year 1 100 000 2 100 000 3 120 000 4 110 000 The discount rate is 8 percent. What's the discount payback period of the projects? (compile a spreadsheet) Calculate NPV, PI of a projects Calculate IRR of a projects Should the firm accept the project? a) b) c) d)
K.Broni Company is considering two mutually exclusive investments. Project P and Project The expected cash flows of these projects are as follows: Year Project (P) Project (Q) ($) ($) 0 (1,000) (1,600) 1 (1,200) 200 2 (600) 400 3 (250) 600 4 2,000 800 5 4,000 100 (a) Which project would you choose if the cost of capital is 10 percent? 20 percent? (b) Critically examine the superiority and…