b) A construction company has identified the following two mutually exclusive projects. The company used 10% discount rate Cash flows (Project A) ($100,000) 50,000 40,000 30,000 30,000 Cash flows (Project B) ($100,000) Year 1 40,000 40,000 40,000 40,000 3 4 Calculate Net Present Value and Actual Rate of return for both the projects. How will you evaluate each project using these project evaluation methods?

b) A construction company has identified the following two mutually exclusive projects. The company used 10% discount rate Cash flows (Project A) ($100,000) 50,000 40,000 30,000 30,000 Cash flows (Project B) ($100,000) Year 1 40,000 40,000 40,000 40,000 3 4 Calculate Net Present Value and Actual Rate of return for both the projects. How will you evaluate each project using these project evaluation methods?

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter12: Capital Budgeting: Decision Criteria

Section: Chapter Questions

Problem 10P: Project S has a cost of $10,000 and is expected to produce benefits (cash flows) of $3,000 per year...

See similar textbooks

Similar questions

ABC Company has the following mutually exclusive projects. Year Project A Project B 0 -$19,520 -$16,800 1 11,500 9,500 2 8,750 7,100 3 2,500 3,500 If the company uses the Profitability Index to rank these two projects, which project should be chosen if the appropriate discount rate is 15 percent?
Compute the (a) net present value, (b) internal rate of return (IRR), (c) modified internal rate of return (MIRR), and (d) discounted payback period (DPB) for each of the following projects. The firm’s required rate of return is 13 percent. Year Project AB Project LM Project UV 0 $(90,000) $(100,000) $ (96,500) 1 39,000 0 (55,000) 2 39,000 0 100,000 3 39,000 147,500 100,000 Which project(s) should be purchased if they are independent? Which project(s) should be purchased if they are mutually exclusive?
A company is considering two projects. The discount rate is 10 percent, and the projects' cash flows would be: Years 1 3 Project A -$700 $500 $300 $100 Project B -$700 $100 $300 | $600 a. Calculate the projects' NPVS and IRRS. b. If the two projects are independent, which project(s) should be chosen? c. If the two projects are mutually exclusive, which project should be chosen?
The Michner Corporation is trying to choose between the following two mutually exclusive design projects: Year Cash Flow (1) Cash Flow (II) 0 123 -$ 73,000 33,000 33,000 3 33,000 -$ 17,100 9,250 9,250 9,250 a-1.If the required return is 11 percent, what is the profitability index for both projects? (Do not round intermediate calculations and round your answers to 3 decimal places, e.g., 32.161.) Project I Project II - If the company applies the profitability index decision rule, which project should the 2. firm accept? O Project I O Project II b- What is the NPV for both projects? (A negative answer should be indicated by a 1. minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) Project I Project II
The Michner Corporation is trying to choose between the following two mutually exclusive design projects: S Year Cash Flow (I) Cash Flow (II) 0 -$ 84,000 -$ 42,000 1 33,900 12,600 2 3 31,500 25,500 44,000 50,000 a-1. If the required return is 17 percent, what is the profitability index for each project? Note: Do not round intermediate calculations and round your answers to 3 decimal places, e.g., 32.161. a-2. If the company applies the profitability index decision rule, which project should it take? b-1. If the required return is 17 percent, what is the NPV for each project? Note: Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. b-2. If the company applies the net present value decision rule, which project should it take? a-1. Project I a-2. Project II b-1. Project I Project II b-2. Project II Project I
Piercy, LLC, has identified the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 -$56,000 -$56000 1 32,000 19,400 2 26,000 23,400 3 19,000 28,000 4 13,200 25,400 Over what range of Discount rates would you choose Project A? Project B? (Please list percentages rounded to 2 decimal places. Hint: The answer is not the same as the IRR.) Project A ____________% Project B ____________% At what discount rate would you be indifferent between these two projects? ____________%
es The Michner Corporation is trying to choose between the following two mutually exclusive design projects: Year Cash Flow (1) Cash Flow (II) -$ 0 1 2 3 Project I Project II 67,000 30,500 30,500 30,500 a-1.If the required return is 11 percent, what is the profitability index for both projects? (Do not round Intermediate calculations and round your answers to 3 decimal places, e.g., 32.161.) a. If the company applies the profitability index decision rule, which project should the 2. firm accept? Project I Project II 17,700 9,550 9,550 9.550 O Project I O Project II b- What is the NPV for both projects? (A negative answer should be Indicated by a 1. minus sign. Do not round Intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) b- If the company applies the NPV decision rule, which project should it take? 2. O Project I O Project II
For the following projects, which project would you select, based on the Equivalent Uniform Amount analysis? Assume the projects are mutually exclusive and MARR is 15%. N (year) Project A Cash Flow($) Project B Cash Flow ($) lo 5000 5500 1 1500 1700 2300 1300 3 900 1300 4 500 1300
The Michner Corporation is trying to choose between the following two mutually exclusive design projects: Year Cash Flow (I) Cash Flow (II) 0 -$ 82,000 -$ 21,700 1 37,600 11,200 2 11,200 11,200 37,600 37,600 a-1. If the required return is 10 percent, what is the profitability index for each project? Note: Do not round intermediate calculations and round your answers to 3 decimal places, e.g., 32.161. a-2. If the required return is 10 percent and the company applies the profitability index decision rule, which project should the firm accept? b-1. If the required return is 10 percent, what is the NPV for each project? Note: Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. b-2. If the company applies the NPV decision rule, which project should it take? a-1. Project I Project II a-2. Project acceptance b-1. Project I Project II b-2. Project acceptance
The Michner Corporation is trying to choose between the following two mutually exclusive design projects: Year Cash Flow (1) Cash Flow (II) -$ -$ 0 55,000 1 25,000 2 25,000 3 25,000 a-1. If the required return is 10 percent, what is the profitability index for both projects? (Do not round intermediate calculations and round your answers to 3 decimal places, e.g., 32.161.) Project I Project II 18,900 10,150 10,150 10,150 a- If the company applies the profitability index decision rule, which project should the 2. firm accept? Project I O Project II Project I Project II 1. b- What is the NPV for both projects? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
a. Calculate the net present value of the following project for discount rates of o, 50, and 100%: Co -6,750 b. What is the IRR of the project? Cash Flows ($) C₁ +4,500 C₂ +18,000
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.