-28,800 20,400 Assuming a cost of capital of 14%, which of these projects should be accepted? Under what conditions on the cost of capital should project B be preferred to project A?
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Assume you are evaluating two mutually exclusive projects, the cash flows of which appear below and that your company uses a cost of capital of 13% to evaluate projects such as these.
|
Time |
Project A Cash Flows |
Project B Cash Flows |
|
0 |
-$46,800 |
-$63,600 |
|
1 |
-21,600 |
20,400 |
|
2 |
43,200 |
20,400 |
|
3 |
43,200 |
20,400 |
|
4 |
43,200 |
20,400 |
|
5 |
-28,800 |
20,400 |
- Assuming a cost of capital of 14%, which of these projects should be accepted?
- Under what conditions on the cost of capital should project B be preferred to project A?
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- Assume a company is going to make an investment in a machine of $825,000 and the following are the cash flows that two different products would bring. Which of the two options would you choose based on the payback method?Assume you are evaluating two mutually exclusive projects, the cash flows of which appear below and that your company uses a cost of capital of 13% to evaluate projects such as these. Time Project A Cash Flows Project B Cash Flows 0 -$46,800 -$63,600 1 -21,600 20,400 2 43,200 20,400 3 43,200 20,400 4 43,200 20,400 5 -28,800 20,400 Sketch the NPV profile for projects A & B. Determine the crossover point for these projects’ NPV profiles.Assume you are evaluating two mutually exclusive projects, the cash flows of which appear below and that your company uses a cost of capital of 13% to evaluate projects such as these. Time Project A Cash Flows Project B Cash Flows 0 -$46,800 -$63,600 1 -21,600 20,400 2 43,200 20,400 3 43,200 20,400 4 43,200 20,400 5 -28,800 20,400 Calculate the payback period and discounted payback period for projects A & B. Calculate the IRR and MIRR of projects A & B. Assume a reinvestment rate of 13% for the calculation of MIRR. Sketch the NPV profile for projects A & B. Determine the crossover point for these projects’ NPV profiles. Assuming a cost of capital of 14%, which of these projects should be accepted? Under what conditions on the cost of capital should project B be preferred to project A? If Project A and Project B are independent, which project should be undertaken? PLEASE ANSWER THE ONES IN BOLD (4,5,6)
- Assume you are evaluating two mutually exclusive projects, the cash flows of which appear below and that your company uses a cost of capital of 13% to evaluate projects such as these. Time Project A Cash Flows Project B Cash Flows 0 -$46,800 -$63,600 1 -21,600 20,400 2 43,200 20,400 3 43,200 20,400 4 43,200 20,400 5 -28,800 20,400 Calculate the payback period and discounted payback period for projects A & B. Calculate the IRR and MIRR of projects A & B. Assume a reinvestment rate of 13% for the calculation of MIRR. Sketch the NPV profile for projects A & B. Determine the crossover point for these projects’ NPV profiles. Assuming a cost of capital of 14%, which of these projects should be accepted? Under what conditions on the cost of capital should project B be preferred to project A? If Project A and Project B are independent, which project should be undertaken? PLEASE ANSWER THE ONE IN BOLD (7)Assume you are evaluating two mutually exclusive projects, the cash flows of which appear below and that your company uses a cost of capital of 13% to evaluate projects such as these. Time Project A Cash Flows Project B Cash Flows 0 -$46,800 -$63,600 1 -21,600 20,400 2 43,200 20,400 3 43,200 20,400 4 43,200 20,400 5 -28,800 20,400 Calculate the payback period and discounted payback period for projects A & B. Calculate the IRR and MIRR of projects A & B. Assume a reinvestment rate of 13% for the calculation of MIRR. Sketch the NPV profile for projects A & B. Determine the crossover point for these projects’ NPV profiles. Assuming a cost of capital of 14%, which of these projects should be accepted? Under what conditions on the cost of capital should project B be preferred to project A? If Project A and Project B are independent, which project should be undertaken?Case 1: Assume you are evaluating two mutually exclusive projects,the cash flows of which appear below, and that your company uses a cost of capital of 8 percent to evaluate projects such as these. Time Project A Cash Flow Project B Cash Flow 0 -$650 -$700 1 100 300 2 250 -200 3 250 550 4 200 200 5 100 80 a. Calculate the payback of Project A. b. Calculate the discounted payback of Project A. c. Calculate the IRR of Project A. d. Using the NPV method and assuming a cost of capital of 8 percent, which of these projects should be accepted?
- Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 −$29,000 −$29000 1 14,400 4,300 2 12,300 9,800 3 9,200 15,200 4 5,100 16,800 a) What is the Internal Rate of Return (IRR) for each of these projects? b) Using the IRR decision rule, which project should the company accept? c) If the required return is 11 percent, what is the Net Present Value (NV) for each of these projects? d) Using the NPV decision rule, which project should the company accept? e) Why do you think the NPV and IRR rules do not agree on same project approval/rejection direction?Consider the following projects: Cash Flows ($) 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 projects: Cash Flows ($) Co Project D E -11, 100 -21, 100 C₁ 22, 200 34,500 Assume that the projects are mutually exclusive and that the opportunity cost of capital is 11%. 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?
- A company is considering three alternative investment projects with different net cash flows. The present value of net cash flows is calculated using Excel and the results follow. Potential Projects Present value of net cash flows (excluding initial investment) Initial investment Project A $ 8,328 (10,000) Project B $ 10,809 (10,000) Project C $ 10,685 (10,000) a. Compute the net present value of each project. b. If the company accepts all positive net present value projects, which of these will it accept? c. If the company can choose only one project, which will it choose on the basis of net present value? Complete this question by entering your answers in the tabs below. Required A Required B Required C Compute the net present value of each project. Potential Projects Project A Project B Project C Present value of net cash flows Initial investment Net present valueDetermine the IRR of the project and the NPV of the project at a cost of capital of 12% using the Excel functions. For the calculation of NPV, includecash flows 1 through 5 in the NPV function and then subtract the initial cost(i.e., = NPV1rate, CF1 CF52 + CF02. For IRR, include cash flows 0 through 5 inthe cash flow rangeConsider two mutually exclusive projects, A and B, whose costs and cash flows are shown in the following table: Year Project A Project B 1 $(15,000) $(22,840) 2 9,000 8,000 3 8,000 8,000 4 2,500 8,000 5 3,000 8,000 Calculate the cross over rate. Please use equations not just excel
