Comparing Investment Criteria Consider the following cash flows of two mutually exclusive projects for Tokyo Rubber Company. Assume the discount rate for both projects is 8 percent. Year 0 1 2 3 Dry Prepreg -$1,800,000 1,080,000 840,000 870,000 a. Based on the payback period, which project should be taken? b. Based on the NPV, which project should be taken? c. Based on the IRR, which project should be taken? Solvent Prepreg -$715,000 380,000 627,000 396,000
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- a. Consider the following mutually exclusive project below. Whichever project chosen, a 15 percent return is required on the investment. Year Cash Flow (A) Cash Flow (B) -RM300,000 -RM40,000 1 RM20,000 RM19,000 RM50,000 RM12,000 3 RM50,000 RM18,000 4 RM390,000 RM10,500 i. Indicate which investment is chosen by applying the discounted payback criterion. Indicate which investment is chosen using the NPV criterion. ii. iii. Indicate which investment is chosen according to the probability index. 2.a. Consider the following mutually exclusive project below. Whichever project chosen, a 15 percent return is required on the investment. Year Cash Flow (A) Cash Flow (B) -RM300,000 -RM40,000 1 RM20,000 RM19,000 RM50,000 RM12,000 3 RM50,000 RM18,000 4 RM390,000 RM10,500 i. Indicate which investment is chosen by applying the discounted payback criterion. th x9 ii. Indicate which investment is chosen using the NPV criterion. the' iii. Indicate which investment is chosen according to the probability index. 2.17. Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B)0 −$291,000 −$41,6001 37,000 20,0002 55,000 17,6003 55,000 17,2004 366,000 14,000 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?
- 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 mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 −$29,000 −$29000 1 14,400 4,300 2 12,300 9,800 3 9,200 15,200 4 5,100 16,800 a) What is the Internal Rate of Return (IRR) for each of these projects? b) Using the IRR decision rule, which project should the company accept? c) If the required return is 11 percent, what is the Net Present Value (NV) for each of these projects? d) Using the NPV decision rule, which project should the company accept? e) Why do you think the NPV and IRR rules do not agree on same project approval/rejection direction?Consider the cash flows of the following investment projects (MARR = 15%): (a) Assume that A and B are mutually exclusive projects. Which project is selected according to the AE criteria? (b) Suppose B and C are mutually exclusive projects. Which project is selected according to the AE criteria?
- Consider the following projects: Cash Flows ($) 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?Consider the following cash flows of two mutually exclusive projects for Tokyo Rubber Company. Assume the discount rate for both projects is 9 percent. Year Dry Prepreg Solvent Prepreg 0 −$ 1,770,000 −$ 785,000 1 1,107,000 410,000 2 914,000 670,000 3 757,000 404,000 a. What is the payback period for both projects? b. What is the NPV for both projects? c. What is the IRR for both projects? d. Calculate the incremental IRR for the cash flows.. Consider the following cash flows of two mutually exclusive projects for Tokyo Rubber Company. Assume the discount rate for both projects is 9 percent. Year Dry Prepreg Solvent Prepreg 0 −$ 1,770,000 −$ 785,000 1 1,107,000 410,000 2 914,000 670,000 3 757,000 404,000 . What is the payback period for both projects? b. What is the NPV for both projects? c. What is the IRR for both projects? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) d. Calculate the incremental IRR for the cash flows. b. What is the NPV for both projects? c. What is the IRR for both projects? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) d. Calculate the incremental IRR for the cash flows.
- 1. The Bolster Company is considering two mutually exclusive projects: Year Cash Flow A Cash Flow B -$100,000 31,250 31,250 31,250 31,250 -$100,000 1 2 4 31,250 The required rate of return on these projects is 12%. 200,000 What is each project's payback period? What is each project's discounted payback period? What is each project's net present value? а. b. с.Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) -$ 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 periodConsider 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?