a) Appraise the two Project using the following methods of investment appraisal: i. Payback period ii. Accounting Rate of Return i. Net present value b) Discuss your findings and advise the company which project they should invest in if the projects are mutually exclusive (that is only one project may be undertaken).
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- Practical Question The total investment required for two projects are estimated at OMR100, 000. The cash flows expected from the two projects for the first four years are explained in the table below. Year Project A Project B Year 1 15,000 15,000 Year 2 28,500 40,000 Year 3 40,000 21,500 Year 4 50,000 35,000 Use the above information and advise which project to select based on payback period method 11 直 hpPorter Company is analyzing two potential investments Initial investment Net cash flow: Year 1 Year 2 Year 3 Year 4 Project X Project Y $ 75,900 $ 64,000 26,000 26,000 26,000 4,400 28,000 28,000 20,000 If the company is using the payback period method, and it requires a payback of three years or less, which project(s) should be selected? 0Coffer Company is analyzing two potential investments. Project X Cost of machine Net cash flow: Year 1 Year 2 $ 85,470 Project Y $ 65,000 33,000 33,000 3,000 30,000 Year 3 Year 4 33,000 0 • 30,000 25,000 If the company is using the payback period méthod, and it requires a payback period of three years or less, which project(s) should be selected? Multiple Choice Project Y. Project X. Both X and Y are acceptable projects. Neither X nor Y is an acceptable project.
- X construction is considering two projects to develop. The estimated net cash flow from each project is as follows:YearProject X ($)Project Y ($)1110,00075,000265,000150,0003100,00060,0004115,00055,000535,00060,000Total425,000400,000Each project requires an investment of $ 200,000. The cost of capital is 10%.Require toa) Calculate Net Present Value, Payback period, ARR and Profitability Index.b) Which Project is to be recommended to develop based on NPV, Profitability Index, Payback period and ARR? Suggestanswer e.g. 168 investments? 2. 2.1 2.2 2.3 2.4 Getum Ltd is considering investing in project Zeta. The following details relate to this project. Project Zeta R562 500 Initial investment Expected economic lifetime Minimum required rate of return Net annual cash inflows: Management Accounting Workbook 1st year 2nd year 3rd year 4th year 4 years 12% R180 000 R195 000 R210 000 R220 000 Required Calculate the following in respect of Project Zeta. The payback period (answer expressed in years, months and days) The net present value (NPV) (round off amounts to the nearest Rand) The internal rate of return (IRR) (answer correct to 2 decimal places) Refer to your calculations in question 2.2 and state whether Getum Ltd should invest in Project Zeta or not. Motivate your answer.Porter Company is analyzing two potential Investments. Project X $ 75,900 Initial investment Net cash flow: Year 1 Year 2 Year 3 Year 4 Multiple Choice O If the company is using the payback period method, and it requires a payback of three years or ess, which project(s) should be selected? Project Y. 26,000 26,000 26,000 0 Project X. Project Y $ 64,000 Both X and Y are acceptable projects. 4,400 28,000 28,000 20,000 Neither X nor Y is an acceptable project. Project Y because it has a lower Initial Investment.
- Question 26 Miller and Sons is evaluating a project with the following cash flows: Year Cash Flows 0 -$150,000 1 20,000 2 45,000 3 100,000 4 30,000 5 -10,000 The company uses a 7 percent reinvestment rate and a 12 percent discount rate on all of its projects. What is the MIRR of the project using the discount approach? Hint: This information will be used on three related MIRR problems. Group of answer choices 7.76 percent 9.05 percent 8.74 percent 7.05 percent 7.92 percentQuestion 3 Fisca Ltd Is Considering Two Independent Projects, Project A And Project B. The Initial Cash Outlay Associated With Project A Is P50,000 And The Initial Cash Outlay Associated With Project B Is P70,000. The Required Rate Of Return On Both Projects Is 12%. The Expected Annual Free Cash Flows From Each Project Are As Follows: YEAR PROJECT A PROJECT B 0 -50,000 -70,000 1 12000 13,000 2 12000 13000 3 12000 13000 4 12000 13000 5 12000 13000 6 12,000 13000 Required: a.For both projects, calculate The net present value. The internal rate of return. The profitability index. Assuming there is capital rationing, advice Fisca ltd which project should be accepted over the other. Explain the limitations of using a profitability index in a situation where there is capital rationing.Question 4 The Janet Corporation is considering two mutually exclusive projects. The free cash flows associated with these projects are as follows: Project A Project BInitial investment -$50,000 -$50,000Cashflow year 1 15,625 0Cashflow year 2 15,625 0Cashflow year 3 15,625 0Cashflow year 4 15,625 0Cashflow year 5 15,625 100,000 The required rate of return on these projects is 10 percent.a. What is each project’s payback period?b. What is each project’s NPV ?c. What is each project’s IRR ?d. What has caused the ranking conflict?e. Which project should be accepted? Why?
- QUESTION 12 You invest $55 000 today into a project with a life of 4 years and which is expected to generate the following cash flows. Year 1. Cashflow 12 000 27 300 2 329 22 000 If you require to invest in projects with a payback period of 2.8 years or less, would this project be suitable? For the toolbar, press ALT+F10 (PC) or ALT+FN+F10 (Mac). BIUS Paragraph Arial 10pt 27C Rain showers I!! IIQUESTION 8 The INTERNAL RATE OF RETURN for the project shown above is: O 3.92% O 13.25 O 15.17% 9 21.22% O No IRR QUESTION 9Porter Company is analyzing two potential Investments. Project X $ 97,090 Initial investment Net cash flow: Year 1 Year 2 Year 3 Year 4 Multiple Choice If the company is using the payback period method, and it requires a payback of three years or less, which project(s) should be selected? O 32,500 32,500 32,500 0 Both X and Y are acceptable projects. O Project Y. Project Y $ 77,000 Project Y because it has a lower Initial Investment. Project X 5,700 34,500 34,500 25,000 Neither X nor Y is an acceptable project.