Case 1: Assume you are evaluating two mutually exclusive projects,the cash flows of which appear below, and that your company uses a cost of capital of 8 percent to evaluate projects such as these. Time Project A Cash Flow Project B Cash Flow 0 -$650 -$700 1 100 300 2 250 -200 3 250 550 4 200 200 5 100 80 a. Calculate the payback of Project A. b. Calculate the discounted payback of Project A. c. Calculate the IRR of Project A. d. Using the NPV method and assuming a cost of capital of 8 percent, which of these projects should be accepted?
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Case 1: Assume you are evaluating two mutually exclusive projects,the cash flows of which appear below, and that your company uses a cost of capital of 8 percent to evaluate projects such as these. Time Project A Cash Flow Project B Cash Flow 0 -$650 -$700 1 100 300 2 250 -200 3 250 550 4 200 200 5 100 80 a. Calculate the payback of Project A. b. Calculate the discounted payback of Project A. c. Calculate the IRR of Project A. d. Using the
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- Assume a company is going to make an investment in a machine of $825,000 and the following are the cash flows that two different products would bring. Which of the two options would you choose based on the payback method?Consider the following projects: Cash Flows ($) Co Project D E -11, 100 -21, 100 C₁ 22, 200 34,500 Assume that the projects are mutually exclusive and that the opportunity cost of capital is 11%. 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?Assume you are evaluating two mutually exclusive projects, the cash flows of which appear below and that your company uses a cost of capital of 13% to evaluate projects such as these. Time Project A Cash Flows Project B Cash Flows 0 -$46,800 -$63,600 1 -21,600 20,400 2 43,200 20,400 3 43,200 20,400 4 43,200 20,400 5 -28,800 20,400 Sketch the NPV profile for projects A & B. Determine the crossover point for these projects’ NPV profiles.
- Assume you are evaluating two mutually exclusive projects, the cash flows of which appear below and that your company uses a cost of capital of 13% to evaluate projects such as these. Time Project A Cash Flows Project B Cash Flows 0 -$46,800 -$63,600 1 -21,600 20,400 2 43,200 20,400 3 43,200 20,400 4 43,200 20,400 5 -28,800 20,400 Calculate the payback period and discounted payback period for projects A & B. Calculate the IRR and MIRR of projects A & B. Assume a reinvestment rate of 13% for the calculation of MIRR. Sketch the NPV profile for projects A & B. Determine the crossover point for these projects’ NPV profiles. Assuming a cost of capital of 14%, which of these projects should be accepted? Under what conditions on the cost of capital should project B be preferred to project A? If Project A and Project B are independent, which project should be undertaken? PLEASE ANSWER THE ONE IN BOLD (7)Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 −$29,000 −$29000 1 14,400 4,300 2 12,300 9,800 3 9,200 15,200 4 5,100 16,800 a) What is the Internal Rate of Return (IRR) for each of these projects? b) Using the IRR decision rule, which project should the company accept? c) If the required return is 11 percent, what is the Net Present Value (NV) for each of these projects? d) Using the NPV decision rule, which project should the company accept? e) Why do you think the NPV and IRR rules do not agree on same project approval/rejection direction?Assume you are evaluating two mutually exclusive projects, the cash flows of which appear below and that your company uses a cost of capital of 13% to evaluate projects such as these. Time Project A Cash Flows Project B Cash Flows 0 -$46,800 -$63,600 1 -21,600 20,400 2 43,200 20,400 3 43,200 20,400 4 43,200 20,400 5 -28,800 20,400 Calculate the payback period and discounted payback period for projects A & B. Calculate the IRR and MIRR of projects A & B. Assume a reinvestment rate of 13% for the calculation of MIRR. Sketch the NPV profile for projects A & B. Determine the crossover point for these projects’ NPV profiles. Assuming a cost of capital of 14%, which of these projects should be accepted? Under what conditions on the cost of capital should project B be preferred to project A? If Project A and Project B are independent, which project should be undertaken?
- Assume you are evaluating two mutually exclusive projects, the cash flows of which appear below and that your company uses a cost of capital of 13% to evaluate projects such as these. Time Project A Cash Flows Project B Cash Flows 0 -$46,800 -$63,600 1 -21,600 20,400 2 43,200 20,400 3 43,200 20,400 4 43,200 20,400 5 -28,800 20,400 Calculate the payback period and discounted payback period for projects A & B. Calculate the IRR and MIRR of projects A & B. Assume a reinvestment rate of 13% for the calculation of MIRR. Sketch the NPV profile for projects A & B. Determine the crossover point for these projects’ NPV profiles. Assuming a cost of capital of 14%, which of these projects should be accepted? Under what conditions on the cost of capital should project B be preferred to project A? If Project A and Project B are independent, which project should be undertaken? PLEASE ANSWER THE ONES IN BOLD (4,5,6)Consider the cash flow of the two projects depicted in Table 3. If WiseGuy Inc. uses payback period rule to choose projects, which of the projects (Project A or Project B) will rank highest? TABLE 3 Project A Project B Time 0. -11,000. -10,000 Time 1. 3,000. 4,000 Time 2. 8,000. 3,000 Time 3. 3,000. 10,000 A) Project A B) Project B C) Project A and Project B have the same ranking. D) It cannot calculate a payback period without a discount rate. 7 Consider the cash flow of the two projects depicted in Table 3. If WiseGuy Inc. uses IRR rule to choose projects, which of the projects (Project A or Project B) will rank highest? A) Project A B) Project B C) Project A and Project B have the same ranking. D) It cannot calculate a payback period without a discount rate.Consider the cash flows for the investment projects given in Table. Assume that the MARR = 10%. (a) Suppose A, B, and C are mutually exclusive projects. Which project would be selected on the basis of the IRR criterion? (b) Assume that projects C and E are mutually exclusive. Using the IRR criterion, which Project would you select?. Net Cash Flow B D. E -4,850 2,100 2,100 2,500 4,250 3,200 2,850 800 300 4,250 4,250 2,850 2,900 1,050 500 -835 -835 -835 -835 1,500 3.250 1,600 1,200 2,100 2,100
- Consider the cash flows for the investment projects given in Table. Assume that the MARR = 10%. (a) Suppose A, B, and C are mutually exclusive projects. Which project would be selected on the basis of the IRR criterion (b) Assume that projects C and È are mutually exclusive. Using the IRR criterion, which Project would you select? Net Cash Flow A В C D E -4,250 3,200 2,850 -4,250 1,500 3,250 1,600 1,200 -4,250 2,850 -4,850 2,100 2,100 2,100 2,100 2,500 1 -835 2,900 1,050 500 2 -835 3 800 -835 4 300 -835Consider the following two projects: Project Year 0 Year 1 Year 2 Year 3 Year 4 Discount Cash Flow Cash Flow Cash Flow Cash Flow Cash Flow Rate A - 100 40 50 60 N/A 0.18 B - 73 30 30 30 30 0.18 Assume that projects A and B are mutually exclusive. The correct investment decision and the best rationale for that decision is to A. invest in project B, since NPV, > NPV, A B. invest in project A, since NPV, > 0. OC. invest in project A, since NPV, IRR, A'Consider two mutually exclusive projects, A and B, whose costs and cash flows are shown in the following table: Year Project A Project B 1 $(15,000) $(22,840) 2 9,000 8,000 3 8,000 8,000 4 2,500 8,000 5 3,000 8,000 Calculate the cross over rate. Please use equations not just excel