3f. Whyis NPV the most accurate capital budgeting technique compared to the payback period and IRR? Relate your answers with the concept of maximizing shareholder’s Note: No need excle formula, thank you
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3f. Whyis NPV the most accurate capital budgeting technique compared to the payback period and IRR? Relate your answers with the concept of maximizing shareholder’s
Note: No need excle formula, thank you
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- Pound Industries is attempting to select the best of three mutually exclusive projects. The initial investment and after-tax cash inflows associated with these projects are shown in the following table Cash flows Project A Project B Project CInitial investment (CF0) $60,000 $100,000 $110,000Cash inflows (CFt), t = 1 to 5 $20,000 $ 31,500 $ 32,500 x. Calculate the payback period for each project.y. Calculate the net present value (NPV) of each project, assuming that the firm has a cost of capital equal to 13%.The Acme Widget Company is considering two mutually exclusive projects with the following after-tax net cash flows: Project A Project B Initial Outlay -$50,000 -$50,000 Inflow year 1 32,000 14,000 Inflow year 2 32,000 14,000 Inflow year 3 14,000 Inflow year 4 14,000 Inflow year 5 14,000 Inflow year 6 14,000 Project A has…The UMCCED Technology is considering two genetic research projects. The required rate of return on these projects is 11%. The two projects provide the following set of after-tax net cash flows. Project AKU Project ENGKAU Initial outlay -RM50,000 -RM50,000 Inflow year 1 RM10,000 RM16,000 Inflow year 2 RM18,000 RM16,000 Inflow year 3 RM15,000 RM16,000 Inflow year 4 RM16,000 RM16,000 Inflow year 5 RM13,000 RM16,000 (a) Determine the payback period for each project. If the institute imposes a 3.5-year maximum acceptable payback period, which of these projects should be accepted? (b) Calculate the net present value (NPV) for each project. (c)Calculate profitability index (PI) for each project. (d)Calculate the internal rate of return (IRR) for project ENGKAU. (e)Based on the IRR given and your answers in part (b) and (c) above, explain…
- The Star company, is considering two mutually exclusive projects. The expected cash flow values for each project are as follows: Period 0 1 2 3 4 Project A ($2.000.000) 900.000 600.000 500.000 800.000 Project B ($2.000.000) 700.000 700.000 700.000 700.000 With the required rate of return for these projects at 15%, calculate: a. Payback Period (PB), Net Present Value (NPV) and Internal Rate of Return (IRR) for both projects. b. Which project would you choose? Describe your answerThe Butler-Perkins Company (BPC) must decide between two mutually exclusive projects. Each project has an initial after-tax cash outflow of $6,500 and has an expected life of 3 years. Annual project after-tax cash flows begin 1 year after the initial investment and are subject to the following probability distributions: Project A Project B Probability Cash Flows Probability Cash Flows 0.2 $6,250 0.2 $ 0.6 6,500 0.6 6,500 0.2 6,750 0.2 19,000 BPC has decided to evaluate the riskier project at 11% and the less-risky project at 8%. a. What is each project's expected annual after-tax cash flow? Round your answers to the nearest cent. Project A: $ Project B: Project B's standard deviation (OB) is $6,185 and its coefficient of variation (CVB) is 0.80. What are the values of gg and CVA? Do not round intermediate calculations. Round your answer for standard deviation to the nearest cent and for coefficient of variation to two decimal places. OA: $ CVA:The Butler-Perkins Company (BPC) must decide between two mutually exclusive projects. Each Project has an initial after-tax cash outflow of $6,500 and has an expected life of 3 years. Annual project after-tax cash flows begin 1 year after the initial investment and are- Subject to the following probability distributions. Project A Project B Probability Cash Flows 0:2 27 Probability 0.2 VOU J Cash Flows TO $6,250 0.6 6,300 0.6. 19,000 0.2. 6,750 0.2 BPC has decided to evaluate the riskier project at 12%. and the less-risky project at 8% a) What is each project's expected annual after tax- Cush flow? Round your answers to the nearest cent. Project A: $ 200 BOLL Project B: I 5/07 Project B's standard deviation (013) is $6,185 and its coefficient of variation (CVB) is 0.80, What are the values of OA and CVA? Do not rand) intermediate calculations. Rand your answer for Standard deviation to the nearest cent and for coefficient of variation to two decimal places. σε: J CVA 6,500
- Tropical Candy Inc are considering two mutually-exclusive projects, A and B. Their cash flows are shown below. Both Project A and Project B have an estimated cost of capital of 10%. Cash flows will be realized at the end of each time period. Year, t Project A Cash Flow at time t Project B Cash Flow at time t 0 -1800 -600 1 110 660 2 263.78 72.6 3 133.1 53.24 4 1024.87 146.41 5 3221.02 1610.51 Calculate the NPV for each project. Which, if either, project should be accepted? Why? Are there other capital budgeting criteria? If yes, list at least one.for Question part (d) and (e) The UMCCED Technology is considering two genetic research projects. The required rate of return on these projects is 11%. The two projects provide the following set of after-tax net cash flows. Project AKU Project ENGKAU Initial outlay -RM50,000 -RM50,000 Inflow year 1 RM10,000 RM16,000 Inflow year 2 RM18,000 RM16,000 Inflow year 3 RM15,000 RM16,000 Inflow year 4 RM16,000 RM16,000 Inflow year 5 RM13,000 RM16,000 Required: (a)Determine the payback period for each project. If the institute imposes a 3.5-year maximum acceptable payback period, which of these projects should be accepted? *Both projects can be accepted because the payback period of both projects is lower than the maximum acceptable payback period of 3.5 years but project ENGKAU is more profitable because its payback period is lower than the…Pound Industries is attempting to select the best of three mutually exclusive projects. The initial investment and after-tax cash inflows associated with these projects are shown in the following table. Cash flows Project A Project B Project C Initial Investment (CFo) $60,000 $100,000 $110,000 Cash ınflows (CFt), t=1 to 5 20,000 31,500 32,500 a.Calculate the payback period for each project. b.Calculate the net present value (NPV) of each project, assuming that the firm has a cost of capital equal to 13%. c.Calculate the internal rate of return (IRR) for each project. d.Summarize the preferences dictated by each measure, and indicate which project you would recommend. Explain why.
- Consider two mutually exclusive projects – Project X and Project Y with identical initial outlays of RM90,000 and depreciable lives of 5 years. Project X is expected to produce free cash flows of RM32,787 each year. Project Y is expected to generate a single after-tax net cash flow of RM223,880 in year 5. The cost of capital is 15 percent.Required:(c) Compute the payback period for each project.Consider two mutually exclusive projects – Project X and Project Y with identical initial outlays of RM90,000 and depreciable lives of 5 years. Project X is expected to produce free cash flows of RM32,787 each year. Project Y is expected to generate a single after-tax net cash flow of RM223,880 in year 5. The cost of capital is 15 percent. Required:(a) Calculate the net present value for each projectThe Janet Corporation is considering two mutually exclusive projects. The free cash flows associated with these projects are as follows: Project A Project B Initial investment -$50,000 -$50,000 Cashflow year 1 15,625 0 Cashflow year 2 15,625 0 Cashflow year 3 15,625 0 Cashflow year 4 15,625 0 Cashflow year 5 15,625 100,000 The required rate of return on these projects is 10 percent. What is each project’s payback period? What is each project’s NPV? What is each project’s IRR? What has caused the ranking conflict? Which project should be accepted? Why?
