9-9What is the discounted payback period for each project?What is the NPV for each project?What is the IRR for each project?What is the profitability index for each project?Which project would you finally choose? Consider the following two mutually exclusive projects:Cash FlowCash FlowYear(A)(B)353,000$48,50042,00062,00062,000437,00023,70021,70019,20014,300Whichever project you choose, if any, you require a return of 16 percent onyour investment.a-1 What is the payback period for each project? (Do not round intermediatecalculations and round your answers to 2 decimal places, e.g., 32.16.)Project AyearsProject Byears-23 4

Formulas: Calculations: Therefore, the Project B should be selected as it has lower discount…

Consider the following two mutually exclusive projects: Cash Flow Cash Flow Year (A) (B) 5353,000 548,500 42,000 62,000 62,000 437,000 23,700 21,700 19,200 14,300 Whichever project you choose, if any, you require a return of 16 percent on your investment. a-1 What is the payback period for each project? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) 1234

Consider the following two mutually exclusive projects: Cash Flow Cash Flow Year (A) (B) 5353,000 548,500 42,000 62,000 62,000 437,000 23,700 21,700 19,200 14,300 Whichever project you choose, if any, you require a return of 16 percent on your investment. a-1 What is the payback period for each project? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) 1234

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 13P

See similar textbooks

Related questions

Q: PI of a project tha

A: PI (Profitability Index) is defined as one of the techniques of capital budgeting. This technique…

Q: Consider the following cash flows for two mutually exclusive capital investment projects. The…

A: Mutually exclusive projects are a set of projects out of which only one project can be accepted.

Q: 1. Murdoch Pty Ltd is considering three mutually exclusive projects. The initial cash outflow and…

A: Here,

Q: Consider the following mutually exclusive project below. Whichever project chosen, a 15 percent…

A: Capital budgeting is the process a business undertakes to evaluate potential major projects or…

Q: Payback Period - What are the Payback Periods of Projects E, F. G and H? Assume all cash flows are…

A: Payback period is the time required to recover the funds used in an investment. It is a method in…

Q: The total investment required for two projects are estimated at OMR100, 000. The cash flows expected…

A: Year Cash flow Cumulative cash flow 1 18000 18000 2 28500 46500 3 42000 88500 4 48000 136500

Q: Use the following information for problems 1 to 5. Assume that the projects are mutually exclusive.…

A: Since you have posted a question with multiple sub-parts, we will solve first three subparts for…

Q: 00 12,000 3 50,000 18,000 4 390,000…

A: Cash flow analysis is important for the business since it allows the business to assess the amount…

Q: Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow…

A: Formulas:

Q: Consider the following two mutually exclusive projects: Cash Flow (B) Cash Flow (A) $-300,000 20,000…

A: Net present value (NPV) is the difference between the present value of cash inflows and the present…

Q: Consider the following two mutually exclusive projects: Cash Flow (A) $-300,000 20,000 50,000 50,000…

A: Formulas: Payback period = Last period with negative cashflows + Last negative cumulative cash…

Q: You are analyzing two proposed capital investments with the following cash flows: Year Project X…

A: The question is based on the concept of Project valuation.

Q: Porter Company is analyzing two potential investments Project X $ 75,900 Initial investment Net cash…

A: Payback period = Initial investment/Annual cash inflows

Q: Consider the following two investment alternatives:The firm's MARR is known to be 15%.(a) Compute…

Q: The Janet Corporation is considering two mutually exclusive projects. The free cash flows associated…

A: Given:

Q: The total investment required for two projects are estimated at OMR100, 000. The cash flows expected…

A: Using excel for calculations

Q: The total investment required for two projects are estimated at OMR90, 000. The cash flows expected…

A: Payback period is period required to recover initial costs.

Q: Find internal rate of return of a project with an initial cost of $43,000, expected net cash inflows…

A: Working of the IRR of the Project is shown below: Hence, the IRR is 14.90%.

Q: Consider the following cash flows on two mutually exclusive projects: Year Project A…

A: Cash flows given for project A are in real terms, so real discount rate should be used to calculate…

Q: Consider the following cashflow of the two mutually exclusive projects. Assume that the discount…

A: The term net present value or NPV refers to the value left after deducting the initial investment…

Q: 22

A: The calculation of net present value for project B is shown in the below table:

Q: Consider the following information: Cash Flows ($) Project C0 C1 C2 C3 C4 A –5,300 1,300 1,300…

A: (Note: Since we only answer up to 3 sub-parts, we’ll answer the first 3. Please resubmit the…

Q: Consider the two mutually exclusive investment projects given in the table below for which MARR =…

A: The internal rate of return (IRR) is the rate of return that equates the present value of future…

Q: You are asked to evaluate two projects X and Y. The cash flow for each is listed below. The…

A: Net present value (NPV) is the difference between the present value of cash inflows and cash…

Q: he following are the cash flows of two projects: Year Project A Project B 0 $ (400 ) $ (400 )…

A: Profitability index is the measure of cost and benefits from the project. It is also regarded as…

Q: Consider the two mutually exclusive investment projects given in the table below for which MARR =…

A: Project A's initial cost is less than Project B's initial cost. As a result, consider A to be the…

Q: Consider the following projects, X and Y where the firm can only choose one. Project X costs $1500…

A: Capital budgeting indicates the evaluation of the profitability of possible investment and projects…

Q: Note: Question 12, 13, 14 and 15 are based on the same two projects A and B. Your firm has estimated…

A: Before investing in new assets or investments, profitability is evaluated by using various method…

Q: Consider the following two mutually exclusive projects: Year Cash flow project A (RM) -54,000 12,700…

A: Pay Back period is the method under Capital budgeting which help in decision making in this Capital…

Q: Your firm has estimated the following cash flows for two mutually exclusive capital investment…

A: The internal rate of return (IRR) of a project is defined as the discount rate which produces a zero…

Q: 1. The Bolster Company is considering two mutually exclusive projects: Year Cash Flow A Cash Flow B…

A: given, year A B 0 -100000 -100000 1 31250 0 2 31250 0 3 31250 0 4 31250 0 5 31250…

Q: The following are the cash flows of two projects: Year Project A Project B 0 $ (400 ) $ (400…

A: Profitability index for Project A and Project B is 0.8227 and 0.8651. Computation of profitability…

Q: You are analyzing two proposed capital investments with the following cash flows: Year Project X…

A: Here, Year Project X Project Y 0 - $20,000 - $20,000 1 12,630 7,470 2…

Q: Consider the following cash flows on two mutually exclusive projects: Year Project A Project B 0…

A: Present worth (NPV) is one of the techniques of capital budgeting analysis. NPV will be the…

Q: Consider the two mutually exclusive investment projects given in the table below for which MARR =…

A: Capital Budgeting is the process of assessing long-term decisions made by management in order to…

Q: Garage, Inc., has identified the following two mutually exclusive projects: Year Cash Flow…

A: Note:We shall answer the first question since the exact one wasn’t specified. Please submit a new…

Q: The total investment required for two projects are estimated at OMR90, 000. The cash flows expected…

A: Payback Period = Years before full recovery + (unrecovered cost at the start of the year/ cashflow…

Q: Consider the following two mutually exclusive projects: Year Cash Flow (X) Cash Flow (Y) 0…

A: Net Present Value(NPV) is excess of present value(PV) of cash inflows over initial outlay of…

Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

9-9

What is the discounted payback period for each project?

What is the NPV for each project?

What is the IRR for each project?

What is the profitability index for each project?

Which project would you finally choose?

Consider the following two mutually exclusive projects:
Cash Flow
Cash Flow
Year
(A)
(B)
353,000
$48,500
42,000
62,000
62,000
437,000
23,700
21,700
19,200
14,300
Whichever project you choose, if any, you require a return of 16 percent on
your investment.
a-1 What is the payback period for each project? (Do not round intermediate
calculations and round your answers to 2 decimal places, e.g., 32.16.)
Project A
years
Project B
years
-23 4

Definition Definition Discount rate of a project wherein its net present value equals zero. Internal rate of return equates the present value of future cash flows with the initial investments. Internal rate of return helps to determine nominal cash flows.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Calculate the discounted payback period as follows:

VIEW

Calculate the net present value as follows;

VIEW

Calculate the internal rate return (IRR) as follows:

VIEW

Calculate the profitability Index as follows:

VIEW

Calculate the payback period as follows:

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 5 steps with 9 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

Consider the following two mutually exclusive projects:Year Cash Flow (X) Cash Flow (Y)0 -$365,000 -$38,0001 25,000 16,0002 65,000 12,0003 65,000 17,0004 425,000 15,000Whichever project you choose, if any, you require a 13 percent return on your investment. i. Which investment will you choose if you use the payback decision criteria? Justify your answer.ii. Which investment will you choose if you use the NPV decision criteria? Justify your answer.iii. Which project will you choose ultimately based on your answers above?
Consider the following two mutually exclusive projects: Year Cash Flow(A) Cash Flow(B) 0 –$ 342,000 –$ 50,500 1 53,000 24,800 2 73,000 22,800 3 73,000 20,300 4 448,000 15,400 Whichever project you choose, if any, you require a return of 14 percent on your investment. a-1 What is the payback period for each project? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) a-2 If you apply the payback criterion, which investment will you choose? Project A Project B b-1 What is the discounted payback period for each project? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) b-2 If you apply the discounted payback criterion, which investment will you choose? Project A Project B c-1 What is the NPV for each…
Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) -$ 15,456 5,225 8,223 13,013 8,705 0 1 234 -$ 276,363 26,400 51,000 57,000 402,000 Whichever project you choose, if any, you require a 6 percent return on your investment. a. What is the payback period for Project A? Payback period b. What is the payback period for Project B? Payback period c. What is the discounted payback period for Project A? Discounted payback period
Consider the following two mutually exclusive projects: YEAR CASH FLOW (A) CASH FLOW (B)0 -$300,000 -$39,0001 20,000 18,0002 70,000 12,0003 80,000 18,0004 400,000 19,000 Whichever project you choose, if any, you require a 15 percent return on your investment.i) If you apply the payback period (PBP) criterion, which investment will you choose? Why?ii) If you apply the net present value (NPV) criterion, which investment will you choose? Why?iii) If you apply the profitability index (PI) criterion, which investment will you choose? Why?iv) If you apply the internal rate of return (IRR) criterion, which investment will you choose?Why?v) Based on your answers in (i) through (iv), which project will you finally…
Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) -$ -$ 0 1235 4 NO a- Whichever project you choose, if any, you require a return of 14 percent on your investment. Project A Project B 357,000 38,000 58,000 58,000 433,000 a-1. What is the payback period for each project? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) 46,500 23,300 21,300 18,800 13,900 Project A Project B Payback period If you apply the payback criterion, which investment will you choose? 2. O Project A O Project B years years b- What is the discounted payback period for each project? (Do not round intermediate 1. calculations and round your answers to 2 decimal places, e.g., 32.16.) Discounted payback period years years
Consider the following two mutually exclusive investment projects:Project Cash Flowsn A B 0 -$4,000 -$8,5001 $400 $11,5002 $7,000 $400Assume that the MARR = 15%.(a) Using the NPW criterion, which project would you select?(b) On the same chart, sketch the PW(i) function for each alternative fori = 0% and 50%. For what range of i would you prefer Project B?
Consider the following two mutually exclusive projects: Year Cash Flow(A) -$ 63,000 39,000 33,000 22,500 14,600 Cash Flow(B) -$ 63,000 25,700 29,700 35,000 24,700 4 1-What is the IRR for each project? Project A Project B % % 2.IF you apply the IRR decision rule, which project should ti 3.Assume the required return is 14 percent. What is the NP Project A Project B 0123
Consider the following two mutually exclusive projects: Year Cash flow project A (RM) 0 1 2 3 4 -54,000 12,700 23,200 27,600 46,500 Cash flow Project B (RM) -23,000 11,600 11,200 12,500 6,000 Whichever project you choose, if you require a 14 percent return on your investment i) Compute the payback period for both project ii) Compute the Net Present Value (NPV) for both projects. iii) Which project do you prefer and which? Fully explain the result of your analysis
Consider the following two mutually exclusive projects: Year Cash Flow Cash Flow B 0 -$318,844 -$27,476 1 27,700 9,057 2 56,000 10,536 3 55,000 11,849 4 399,000 13,814 The required return is 15 percent for both projects. Which one of the following statements related to these projects is correct? A. Because both the IRR and the PI imply accepting Project B, that project should be accepted.B. The profitability rule implies accepting Project A.C. The IRR decision rule should be used as the basis for selecting the project in this situation.D. Only NPV implies accepting Project A.E. NPV, IRR, and PI all imply accepting Project A.
Consider two mutually exclusive projects with the following expected cash flows : Cash Flows Year Project C Project D 0 -15,000 -21,000 1 6,000 6,000 2 12,000 16,000 3 8,000 14,000 Whichever project you choose, if any, you require a return of 12% on your investment. a. If you apply the discounted payback criterion, which project will you choose? Why? b. If you apply the NPV criterion, which project will you choose? Why? c. Based on your answers in (a) and (b), which project will you finally choose? Why ? (i.e clearly explain the strengths and the weaknesses of each method therefore the reason(s) for choosing the project based on the chosen method)
Consider the following two mutually exclusive projects: Cash Flow (B) -$ 57,000 32,900 24,300 18,300 17,800 Year 0 1 2 3 4 Cash Flow (A) -$ 215,000 34,000 45,000 51,000 270,000 The required return on these investments is 13 percent. a. What is the payback period for each project? Note: Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. b. What is the NPV for each project? Note: Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. c. What is the IRR for each project? Note: Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16. d. What is the profitability index for each project? Note: Do not round intermediate calculations and round your answers to 3 decimal places, e.g., 32.161. e. Based on your answers in (a) through (d), which project will you finally choose?
Consider the following two mutually exclusive projects: Cash Flow Cash Flow Year 0 (A) -$360,000 (B) -$56,000 1 47,000 28,000 2 67,000 24,000 3 67,000 21,500 4 442,000 16,600 Whichever project you choose, if any, you require a 15% return on your investment. a-1. What is the payback period for each project? (Round the final answers to 2 decimal places.) Project A Project B Payback Period 3.40 years 2.19 years a-2. If you apply the payback criterion, which investment will you choose? O Project A Project B b-1. What is the discounted payback period for each project? (Do not round intermediate calculations. Round the final answers to 2 decimal places.)