2. Hanmi Group, a consumer electronics conglomerate, is reviewing its annual budget in wireless technology. It is considering Investments in three different technologies to develop wireless communication devices. Consider the following cash flows of the three Independent projects available to the company. Assume the discount rate for all projects is 10 percent. Further, the company has only $22 million to invest in new projects this year. Cash Flows (in $ millions) Year CDMA G4 Wi-Fi 0 1 2 3 $ $ 15 7 15 12 a. Calculate the profitability Index for each Investment. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) 22 12 19 9.5 26 35 4.5 22 22 b. Calculate the NPV for each investment. (Do not round intermediate calculations and enter your answer in dollars, not millions, rounded to 2 decimal places, e.g.. 1,234,567.89) a. CDMA G4 WI-FI b. COMA G4 Wi-Fi Year 0 1 2 3 Show Transcribed Text Suppose the following two independent investment opportunities are available to Fitz, Inc. The appropriate discount rate is 12 percent. Project Alpha -$6,300 3,200 3,100 1,900 Project Alpha Project Beta Project Beta -$7,900 1,800 6,300 4,900 a. Compute the profitability index for each of the two projects. (Do not round intermediate calculations and round your answers to 3 decimal places, e.g., 32.161.) c Profitability Index b.rule? Which project(s), if either, should the company accept based on the profitability index O Project Alpha O Both projects O Neither project O Project Beta
2. Hanmi Group, a consumer electronics conglomerate, is reviewing its annual budget in wireless technology. It is considering Investments in three different technologies to develop wireless communication devices. Consider the following cash flows of the three Independent projects available to the company. Assume the discount rate for all projects is 10 percent. Further, the company has only $22 million to invest in new projects this year. Cash Flows (in $ millions) Year CDMA G4 Wi-Fi 0 1 2 3 $ $ 15 7 15 12 a. Calculate the profitability Index for each Investment. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) 22 12 19 9.5 26 35 4.5 22 22 b. Calculate the NPV for each investment. (Do not round intermediate calculations and enter your answer in dollars, not millions, rounded to 2 decimal places, e.g.. 1,234,567.89) a. CDMA G4 WI-FI b. COMA G4 Wi-Fi Year 0 1 2 3 Show Transcribed Text Suppose the following two independent investment opportunities are available to Fitz, Inc. The appropriate discount rate is 12 percent. Project Alpha -$6,300 3,200 3,100 1,900 Project Alpha Project Beta Project Beta -$7,900 1,800 6,300 4,900 a. Compute the profitability index for each of the two projects. (Do not round intermediate calculations and round your answers to 3 decimal places, e.g., 32.161.) c Profitability Index b.rule? Which project(s), if either, should the company accept based on the profitability index O Project Alpha O Both projects O Neither project O Project Beta
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter19: Capital Investment
Section: Chapter Questions
Problem 15E: Gina Ripley, president of Dearing Company, is considering the purchase of a computer-aided...
Related questions
Concept explainers
Cost of Debt, Cost of Preferred Stock
This article deals with the estimation of the value of capital and its components. we'll find out how to estimate the value of debt, the value of preferred shares , and therefore the cost of common shares . we will also determine the way to compute the load of every cost of the capital component then they're going to estimate the general cost of capital. The cost of capital refers to the return rate that an organization gives to its investors. If an organization doesn’t provide enough return, economic process will decrease the costs of their stock and bonds to revive the balance. A firm’s long-run and short-run financial decisions are linked to every other by the assistance of the firm’s cost of capital.
Cost of Common Stock
Common stock is a type of security/instrument issued to Equity shareholders of the Company. These are commonly known as equity shares in India. It is also called ‘Common equity
Question
Transcribed Image Text:2.
Hanmi Group, a consumer electronics conglomerate, is reviewing its annual budget in
wireless technology. It is considering Investments in three different technologies to
develop wireless communication devices. Consider the following cash flows of the three
Independent projects available to the company. Assume the discount rate for all projects
is 10 percent. Further, the company has only $22 million to invest in new projects this
year,
Cash Flows (in $ millions)
Year CDMA G4 Wi-Fi
0
7
15
$ $15
1
2
3
a.
CDMA
G4
Wi-Fi
b. CDMA
a. Calculate the profitability Index for each Investment. (Do not round intermediate
calculations and round your answers to 2 decimal places, e.g., 32.16.)
b. Calculate the NPV for each investment. (Do not round intermediate calculations
and enter your answer in dollars, not millions, rounded to 2 decimal places, e.g.,
1,234,567.89)
G4
Wi-Fi
Year
0
1
2
3
12
9.5
4.5
12
26
22
Project
Alpha
-$6,300
$22
19
Show Transcribed Text
3,200
3.100
1,900
35
22
Project Alpha
Project Beta
Suppose the following two independent investment opportunities are available to Fitz,
Inc. The appropriate discount rate is 12 percent.
Project Beta
-$7,900
1,800
6.300
4,900
3
a. Compute the profitability index for each of the two projects. (Do not round
intermediate calculations and round your answers to 3 decimal places, e.g., 32.161.)
Profitability Index
c
O Project Alpha
O Both projects
O Neither project
O Project Beta
b. Which project(s), if either, should the company accept based on the profitability index
rule?
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 3 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
Cornerstones of Cost Management (Cornerstones Ser…
Accounting
ISBN:
9781305970663
Author:
Don R. Hansen, Maryanne M. Mowen
Publisher:
Cengage Learning
Intermediate Financial Management (MindTap Course…
Finance
ISBN:
9781337395083
Author:
Eugene F. Brigham, Phillip R. Daves
Publisher:
Cengage Learning
Cornerstones of Cost Management (Cornerstones Ser…
Accounting
ISBN:
9781305970663
Author:
Don R. Hansen, Maryanne M. Mowen
Publisher:
Cengage Learning
Intermediate Financial Management (MindTap Course…
Finance
ISBN:
9781337395083
Author:
Eugene F. Brigham, Phillip R. Daves
Publisher:
Cengage Learning
Managerial Accounting: The Cornerstone of Busines…
Accounting
ISBN:
9781337115773
Author:
Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:
Cengage Learning