ABC Company that has current operating assets of one million and net income of P200,000 has an opportunity to invest in a project that requires an additional investment of P250,000 and an increase in net income by P40,000. After the investment, the company’s RoI will be • 17% • 18.2% • 19.2% • 21% • None of the above
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- XY Company is considering 5 investment projects as follows: Project Investment ($) Profitability index (PI) A 10,000 1.2 B 6,000 1.1 C 18,000 1.6 D 14,000 0.9 E 12,000 1.3 The company has $30,000 available for investment. Projects C and E are mutually exclusive. All projects can be undertaken only once and are not divisible. Required: Calculate the projects’ NPVwhich of the two projects, Project O and Project Y, should the company pursue? Why? The firm's cost of capital has been determined at 9% Project O Project Y Initilal Investment P50,000 P48 000 Cash Flows 1 P20,000 30,000 2 25,000 35,000 3 15,000 40,000 4 20,000 10,000Show solution and process from numbers 123 1. A company’s average operating assets are P220,000 and its net operating income is P44,000. The company invested in new project, increasing average assets to P250,000 and increasing net operating income to P49,550. What is the project’s residual income if the required rat of return is 20%? 2. Gurey Corp. uses an imputed interest rate of 13% in the calculation of residual income. Division Tiffey, which is part of Gurey Corp., had invested capital of P1,200,000 and an ROI of 16%. On the basis of this information, what was Tiffey division residual income? 3. Helo Company has provided the following data: Sales, P5,000,000; Interest expense, P30,000; Total assets, beginning of the year, P185,000; Total assets, end of the year, P215,000; Return on assets, 15.5%; Tax rate, 30%. What is the net income of Helo Co.?
- Shaylee Corporation has $2.00 million to invest in new projects. The company's managers have presented a number of possible options that the board must prioritize. Information about the projects follows: Initial investment Present value of future cash flows Project A 5 430,000 780,000 Project 8 $ 245,000 430,000 Required: 1. is Shaylee able to invest in all of these projects simultaneously? 2-a. Calculate the profitability index for each project. 2-b. What is Shaylee's order of preference based on the profitability index? Complete this question by entering your answers in the tabs below. Reg 1 Is Shaylee able to invest in all of these projects simultaneously? is Shaylee able to inved in all of these projects intaneously Reg Req 2A and 28 > Project C $735,000 1,215,000 Project D $360,000 1,576,000""Given: The company has set a goal of 25% Rate of Return on any of its investments. For the Existing System, Process A, Investment was equal to P5,600,000.00 and Operation Cost equals P 965,000.00. The company is contemplating on making an alternative Process B, where the Investment equals P7,000,000.00 and with a corresponding Operation Cost of only P325,000.00 Should the proposed alternative be adopted?"" O ""No, since the difference in the relative costing between Process A (which is 965,000/5,600,000 = 17.23 %) and that of the costing for Alternative B (equal to 325,000/7,000,000= 4.6%) is only 12.63% and such 12.63 % is very much lower than the company target of 25 %"" O " ""Yes, since the ROI for Process B ia 45.50 %"" O " ""No. Since the Revenues are not given, therefore the Net Cash Inflow or Income could not be determined"" O " ""Yes, since the ROI for Process B is 45.71 %""Assume that Google invests $2.42 billion in capital expenditures, including $1.08 billion related to manufacturing capacity. Assume that these projects have a seven-year life and that management requires a 15% internal rate of return on those projects. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.)Required1. What is the amount of annual cash flows that Google must earn from those expenditures to achieve a 15% internal rate of return? (Hint: Identify the seven-period, 15% factor from the present value of an annuity table and then divide $1.08 billion by the factor to get the annual cash flows required.)2. Refer to the financial statements in Appendix A. Identify the amount that Google invested in capital assets for the year ended December 31, 2017.3. Did Google or Apple invest more in capital assets for 2017? What is the amount of annual cash flows that Google must earn from those expenditures to achieve a 15% internal rate of…
- Exercise 1. You have been asked to estimate the NPV of an investment in a new 5-year venture. The revenue projections are presented in the following table. 0 Year Projected sales 1 2 450 000 500 000 500 000 4 400 000 250 000 The variable costs are expected to be at the level of 50% of the revenues. It is also estimated that the overhead expenditures (excl. depreciation) will permanently increase by 50 000 in year 1 and will remain at that level for the remaining years. The company invests 500 000 euros into capital assets and applies linear depreciation method and fully depreciates the investments within 5 years. However, it is expected that the market value of these capital assets is still 100 000 euros, and the company has an option to sell the assets at that market price. The project also needs investments into working capital. It is estimated that the working capital needed to support the project is at the level of 15% of the annual revenues. The investments into working capital…Mustafa Inc. has three potential investment projects but can choose only one to invest in. Below is financial information on these projects: Project Investment Net Present Value 1 $300,000 $61,500 2 $325,000 $77,000 3 $215,000 $62,000 Use the profitability index, which project should the company choose?Mooradian Corporation estimates that its weighted average cost of capital is 14.2 percent. The company is considering two mutually exclusive projects whose after-tax cash flows are as follows: Year 0 1 2 Project S CF ($3,263) $1,403 $2,806 $3,304 $977 ($961) What is the modified internal rate of return (MIRR) of the project with the highest NPV? Should this project be accepted? 3 4 33.93%; Yes 35.93%; Yes O 32.93%; No 31.93%; No Project L CF ($4,546) $3,896 $2,373 $2,041 30.93%; No
- The management of ABC Corporation is considering the following three investment projects (ignore income taxes): Investment required Present value of cash inflows O Project Y Project X Project Y Project Z Project X Project Z $ 22,000 $40,000 $56,000 According to the profitability index, the most profitable project is: $40,000 $60,000 $90,000B Shaylee Corporation has $2.00 million to invest in new projects. The company's managers have presented a number of possible options that the board must prioritize. Information about the projects follows: Initial investment. Present value of future cash flows Project A $ 420,000 770,000 Required: 1. Is Shaylee able to invest in all of these projects simultaneously? 2-a. Calculate the profitability index for each project. 2-b. What is Shaylee's order of preference based on the profitability index? Complete this question by entering your answers in the tabs below. Project B $ 235,000 420,000 Req 1 Req 2A and 28 Is Shaylee able to invest in all of these projects simultaneously? Is Shaylee able to invest in all of these projects simultaneously? Reg 1 Req 2A and 2B > Project C $725,000 1,205,000 Project Di $950,000 1,565,000The manager of a small firm wants to know which among the three different projects should the company enter into. Details of the three projects are as follows: JOJO GINA MARIA LORINDA KANOR Initial investment P 120,000 P 125,000 P 180,000 P160,000 P35,000 Net present value 25,000 24,000 45,000 35,000 10,000 Internal rate of return 10% 15% 12% 8% 9% Profitability index 1.21 1.19 1.25 1.22 1.29 If the management has a budget of P500,000 only, which projects would be undertaken? a. Jojo, Gina, Lorinda, and Kanor b. Gina, Maria, Lorinda, and Kanor c. Jojo, Maria, Lorinda, and Kanor d. Jojo, Gina, Maria, and Kanor