All techniques: Decision among mutually exclusive investments Pound Industries is attempting to select the best of three mutually exclusive projects. The initial investment and subsequent cash inflowsassociated with these projects are shown in the following table.Cash flowsProject A$30,000$10,000Project BProject CInitial investment (CF)$60,000$21,500$70,000$22,500Cash inflows (CF), t= 1 to 5a. Calculate the payback period for each project.The NPv of projeci C is 017.10|. (Rouna to tne nearesi cEnt.)c. The IRR of project A is%. (Round to two decimal places.)The IRR of project B is %. (Round to two decimal places.)The IRR of project C is%. (Round to two decimal places.)d. Which project would you recommend? (Select the best answer below.)O A. Project COB. Project BOC. Project A

To Find:- Payback period IRR Which project to select

Answered: All techniques: Decision among mutually…

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

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All techniques: Decision among mutually exclusive investments Pound Industries is attempting to select the best of three mutually exclusive projects. The initial investment and subsequent cash inflows associated with these projects are shown in the following table. Cash flows Initial investment (CF) Cash inflows (CF), t= 1 to 5 OA. Project A 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 11%. c. Calculate the internal rate of return (IRR) for each project. d. Indicate which project you would recommend. a. The payback period of project A is The payback period of project B is The payback period of project C is b. The NPV of project A is $ The NPV of project B is $ (Round to the nearest cent.) The NPV of project C is $. (Round to the nearest cent.) c. The IRR of project A is%. (Round to two decimal places.) The IRR of project B is %. (Round to two decimal places.) The IRR of…
All techniques--Decision among mutually exclusive investments 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. Project B $70,000 $21,500 Project C $60,000 $22,500 Cash flows Initial investment (CF) Cash inflows (CF), t= 1 to 5 Project A $30,000 $10,000 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 12%. c. Calculate the internal rate of return (IRR) for each project. d. Indicate which project you would recommend. a. The payback period of project A is years. (Round to two decimal places.) The payback period of project B is years. (Round to two decimal places.) The payback period of project C is years. (Round to two decimal places.) b. The NPV of project A is $. (Round to the nearest cent.) The NPV of project B is $ (Round…
NPV and IRR Analysis Cummings Products Company is considering two mutually exclusive investments whose expected net cash flows are as follows: EXPECTED NET CASH FLOWS Year Project A Project B 0 -$290 -$400 1 -387 134 2 -193 134 3 -100 134 4 600 134 5 600 134 6 850 134 7 -180 134 Construct NPV profiles for Projects A and B. Select the correct graph. (see image) 2. What is each project's IRR? Do not round intermediate calculations. Round your answers to two decimal places. Project A % Project B % 3. Calculate the two projects' NPVs, if you were told that each project's cost of capital was 14%. Do not round intermediate calculations. Round your answers to the nearest cent.Project A $ Project B $ Which project, if either, should be selected? Calculate the two projects' NPVs, if the cost of capital was 17%. Do not round intermediate calculations. Round your answers to the nearest cent.Project A $ Project B $ Which project would be the proper…
Cummings Products Company is considering two mutually exclusive investments whose expected net cash flows are as follows: Expected Net Cash Flows Year Project A Project B 0 -$340 -$630 1 -528 210 2 -219 210 3 -150 210 4 1,100 210 5 820 210 6 990 210 7 -325 210 Select the correct graph for NPV profiles for Projects A and B. The correct graph is . What is each project's IRR? Do not round intermediate calculations. Round your answers to two decimal places. Project A: % Project B: % Calculate the two projects' NPVs, if each project's cost of capital was 11%. Do not round intermediate calculations. Round your answers to the nearest cent. Project A: $ Project B: $ Which project, if either, should be selected? should be selected. Calculate the two projects' NPVs, if each project's cost of capital was 18%. Do not round intermediate calculations. Round your answers to the nearest cent. Project A: $ Project B:…
Cummings Products Company is considering two mutually exclusive investments whose expected net cash flows are as follows: EXPECTED NET CASH FLOWS Year Project A Project B 0 -$300 -$405 1 -387 134 2 -193 134 3 -100 134 4 600 134 5 600 134 6 850 134 7 -180 134 Construct NPV profiles for Projects A and B. 1.What is each project's IRR? Do not round intermediate calculations. Round your answers to two decimal place Project A % Project B % Calculate the two projects' NPVs, if you were told that each project's cost of capital was 10%. Do not round intermediate calculations. Round your answers to the nearest cent.Project A $Project B $Which project, if either, should be selected?-Select-Project AProject BItem 6Calculate the two projects' NPVs, if the cost of capital was 17%. Do not round intermediate calculations. Round your answers to the nearest cent.Project A $Project B $What would be the proper choice?-Select-Project…
Consider two investments A and B with the following sequences of cash flows: Net Cash Flow n Project A Project B 0 -$120,000 -$100,000 1 20,000 15,000 2 20,000 15,000 3 120,000 130,000 (a) Compute the IRR for each investment. (b) At MARR = 15%, determine the acceptability of each project. (c) If A and B are mutually exclusive projects, which project would you select, based on the rate of return on incremental investment?
NPV and IRR Analysis Cummings Products Company is considering two mutually exclusive investments whose expected net cash flows are as follows: EXPECTED NET CASH FLOWS Year Project A Project B 0 -$300 -$405 1 -387 134 2 -193 134 3 -100 134 4 600 134 5 600 134 6 850 134 7 -180 134 What is each project's IRR? Do not round intermediate calculations. Round your answers to two decimal places. Project A %Project B % Calculate the two projects' NPVs, if you were told that each project's cost of capital was 10%. Do not round intermediate calculations. Round your answers to the nearest cent.Project A $Project B $Calculate the two projects' NPVs, if the cost of capital was 17%. Do not round intermediate calculations. Round your answers to the nearest cent.Project A $Project B $
NPV and IRR Analysis Cummings Products Company is considering two mutually exclusive investments whose expected net cash flows are as follows: EXPECTED NET CASH FLOWS Year Project A Project B -$430 -$680 1 -528 210 2 -219 210 3 -150 210 4 1,100 210 820 210 6 990 210 7 -325 210 a. Construct NPV profiles for Projects A and B. Select the correct graph. A B D VPVS) 1400- VPVS) I 1400- VPS) 1400- VPVS) 1400- 1200- 1200A 1200- 1200 1000 1000 1000 1000 800- 800 800 800 Project A Project B Project A Project A 600 600 600 600 400 400 400 400 200- Project B Project A Project B - 200 200 200- Project B +.... Cost of cabar so Costof cabiar5 -5 Cost of capita 10 20 25 -5 10 20 25 -5 10 va15 20 25 30 -5 Cost of catal 20 25 30 -200 -200 -200 -200 -400 -400 -400 -4001 The correct graph is -Select- v
Consider the following projects: Cash Flows ($) 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?
Ranking Investment Proposals: Payback Period, Accounting Rate of Return, and Net Present Value Presented is information pertaining to the cash flows of three mutually exclusive investment proposals: Proposal X Proposal Y Proposal Z $92,000 $92,000 $92,000 Initial investment Cash flow from operations Year 1 Year 2 Year 3 Disinvestment Life (years) 90,000 2,000 47,500 0 3 years 46,000 46,000 47,500 0 3 years 92,000 0 1 year Select the best investment proposal using the payback period, the accounting rate of return on initial investment, and the net present value criteria. Assume that the organization's cost of capital is 14 percent. Note: Follow rounding instructions noted for each computation. Use a negative sign with your answers, when appropriate. Proposal Z Best proposal 0 x Z 0✔ X,Y 0 X X Payback period (years) Accounting rate of return; Round answers to 4 decimal places. Net present value; Round answers to nearest whole number. Proposal X 0 x 0 x 0 x Proposal Y 0 x 0 x 0 x ◆ ◆ ◆ ✓
IRR: Mutually exclusive projects Nile Inc. wants to choose the better of two mutually exclusive projects that expand warehouse capacity. The projects' cash flows are shown in the following table: . The cost of capital is 18%. a. The internal rate of return (IRR) of project X is %. (Round to two decimal places.) Data table Is project X acceptable on the basis of IRR? (Select the best answer below.) (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) Yes O No Project X $500,000 Project Y $310,000 The internal rate of return (IRR) of project Y is %. (Round to two decimal places.) Initial investment (CF) Is project Y acceptable on the basis of IRR? (Select the best answer below.) Year (t) Cash inflows (CF,) $120,000 $140,000 $105,000 $60,000 1 $100,000 O Yes $160,000 O No $170,000 $190,000 b. Which project is preferred? (Select the best answer below.) $250,000 $30,000 OA. Project X N 34 5
Cummings Products is considering two mutually exclusive investments whose expected net cash flows are as follows: expected Net Cash Flows Year Project A Project B 0 ($400) ($650) 1 -528 210 2 -219 210 3 -150 210 4 1100 210 5 820 210 6 990 210 7 -325 210 a. Construct NPV profiles for Projects A and B. b. What is each project’s IRR? c. If each project’s cost of capital were 10%, which project, if either, should be selected? If the cost of capital were 17%, what would be the proper choice?d. What is each project’s MIRR at the cost of capital of 10%? At 17%? (Hint: Consider Period 7 as the end of Project B’s life.)e. What is the crossover rate, and what is its significance?

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