Annual cash inflows that will arise from two competing investment projects are given below: Investment B $ 10,000 9,000 8,000 7,000 $ 34,000 Year 1 2 3 4 Investment A $ 7,000 8,000 9,000 10,000 $ 34,000 The discount rate is 7%. Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using tables. Required: Compute the present value of the cash inflows for each investment. Year 1 2 3 4 Present Value of Cash Flows Investment B Investment A

Annual cash inflows that will arise from two competing investment projects are given below: Investment B $ 10,000 9,000 8,000 7,000 $ 34,000 Year 1 2 3 4 Investment A $ 7,000 8,000 9,000 10,000 $ 34,000 The discount rate is 7%. Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using tables. Required: Compute the present value of the cash inflows for each investment. Year 1 2 3 4 Present Value of Cash Flows Investment B Investment A

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Annual cash inflows that will arise from two competing investment projects are given below: Year Investment A Investment B 1 $7,000 $ 10,000 2 8,000 3 9,000 4 10,000 $ 34,000 9,000 8,000 7,000 $ 34,000 The discount rate is 7%. Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using tables. Required: Compute the present value of the cash inflows for each investment.
A project has the following cash flows set out below. What is the profitability index of this project if the relevant discount rate is 2 percent? Enter your final answer to two decimal places. Year Cash flow 0 -1,745 1 537 2 2,066 3 3,912
You are given the following information about the cash flows for Projects A and B: Project B $12,643.00 $6,264.00 $5.119.00 $4,284.00 $3,265.00 $2,884.00 Year 0 1 2 3 4 5 Given this information, and assuming a risk-adjusted discount rate of 14.0 percent for both projects, determine the internal rate of return (IRR) for the project with the highest net present value (NPV). 26.0818% 25.6301% 25.1784% Project A -$10,356.00 $2,185.00 $4,294.00 $4,642.00 $6,360.00 $3,125.00 O24.2750%
Consider the following two mutually exclusive projects: Year Cash Flow (X) Cash Flow (Y) 0 -24,063 -24,063 1 10,320 12,063 2 10,900 9,360 3 10,800 10,400 Sketch the NPV profiles for X and Y over a range of discount rates from zero to 25 percent (take 0%, 5%, 10%, 15%, 20%, 25%). Calculate the IRR of the projects. What is the relationship between NPV and IRR for your values? What is the crossover rate for these two projects and what it indicates for your values? Note - answer all the parts of the question.
1. Consider the following two mutually exclusive projects, X and Y, and their cash flows information, Project X Y (a) (b) Year 0 ($2,600) ($3,100) Year 1 $1,000 $ 900 Cash Flows Year 2 $1,300 $1,500 Year 3 $ 800 $1,100 Year 4 $ 400 $ 800 Assume that the appropriate discount rate is 14%, calculate the Payback Period, the Modified IRR (McKinsey's approach) AND the Profitability Index for Project Y. State clearly the key piece of information that you need in order to make the correct investment recommendation on the two projects according to the Payback Period method. Given that Project X's IRR is 15.16%, which project should be chosen according to the IRR method? Precisely explain how you should construct the incremental project and its cash flows numerically. Precisely explain your final selection between these two mutually exclusive projects according to the incremental project (IRR) analysis.
Compute the internal rate of return for the cash flows of the following two projects: (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) Year Project A Project B 0 –$ 9,800 –$ 7,400 1 3,800 2,100 2 4,600 5,300 3 3,400 3,000 Internal rate of return Project A % Project B %
The following table contains the estimated cash flows of a project. Assume the appropriate discount rate (hurdle rate) is 14%. Answer the following questions: Year Operating Cash Flow 0 -$20,000 1 $7,000 2 $8,000 3 $9,000 4 $4,000 b. What is the NPV of project 1?
The following table contains the estimated cash flows of a project. Assume the appropriate discount rate (hurdle rate) is 14%. Answer the following questions: Year Operating Cash Flow 0 -$20,000 1 $7,000 2 $8,000 3 $9,000 4 $4,000 c. What is the IRR of project 1?
Compute the internal rate of return for the cash flows of the following two projects. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) Year Project A 0 -$13,800 Project B -$ 11,400 1 5,400 2,900 2 6,200 8,500 3 5,000 4,600 Project A Project B % %
Compute the internal rate of return for the cash flows of the following two projects: Note: Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16. Year Project A Project B 0 −$ 13,800 −$ 11,400 1 5,400 2,900 2 6,200 8,500 3 5,000 4,600
Information on four investment proposals is given below: Investment required Present value of cash inflows Net present value Life of the project 4 Required: 1. Compute the project profitability index for each investment proposal. (Round your answers to 2 decimal places.) 2. Rank the proposals in terms of preference. Investment Proposal A BUD C Project Profitability Index Investment Proposal A D $(106,000) $(116,000) $(86,000) $(144,000) 142,040 178,640 118,680 213,120 $36,048 $ 62,640 $ 32,680 $ 69,120 5 years 7 years years 6 years Rank Preference:
Annual cash inflows that will arise from two competing investment projects are given below: Investment A $ 3,000 4,000 5,000 6,000 $ 18,000 Year 1 2 3 4 The discount rate is 10% Click here to view Exhibit 148 1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using tables Required: Compute the present value of the cash inflows for each investment Year 1234 S S Investment B $6,000 5,000 4,000 3,000 $18,000 Present Value of Cash Flows Investment A 300 300 $ Investment B