Better plc is comparing two mutually exclusive projects, whose details are given below. The company’s cost of capital is 12 per cent. Project A Project B £m £m Year 0 (150) (152) Year 1 40 80 Year 2 50 80 Year 3 60 50 Year 4 60 40 Year 5 80 30 (a). Using the net present value method, which project should be accepted? (b). Using the internal rate of return method, which project should be accepted? (c). If the cost of capital increases to 20 per cent in year 5, would your advice change?

Better plc is comparing two mutually exclusive projects, whose details are given below. The company’s cost of capital is 12 per cent. Project A Project B £m £m Year 0 (150) (152) Year 1 40 80 Year 2 50 80 Year 3 60 50 Year 4 60 40 Year 5 80 30 (a). Using the net present value method, which project should be accepted? (b). Using the internal rate of return method, which project should be accepted? (c). If the cost of capital increases to 20 per cent in year 5, would your advice change?

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 13P

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Better plc is comparing two mutually exclusive projects, whose details are given below.The company’s cost of capital is 12 per cent.Project A Project B£m £mYear 0 (150) (152)Year 1 40 80Year 2 50 80Year 3 60 50Year 4 60 40Year 5 80 30(a). Using the net present value method, which project should be accepted?(b). Using the internal rate of return method, which project should be accepted?(c). If the cost of capital increases to 20 per cent in year 5, would your advice change? Hello.i have the solution you send me but i am trying to understand where did you get the calculations for in the worknotes tabel. I still cant calculate the IRR.i really dont understand how to do it. Can you help me please by using the numbers in the tabel so i can understand what is that you are adding or taking away please? I know how to calculate the NPV but not the IRR. I have went over and over this IRR but i still dont understand how you calculate it using the pv and the npv.i dont wanna use excel.
Better plc is comparing two mutually exclusive projects, whose details are given below.The company’s cost of capital is 12 per cent.Project A Project B£m £mYear 0 (150) (152)Year 1 40 80Year 2 50 80Year 3 60 50Year 4 60 40Year 5 80 30(a). Using the net present value method, which project should be accepted?(b). Using the internal rate of return method, which project should be accepted?(c). If the cost of capital increases to 20 per cent in year 5, would your advice change? Hello.i have the solution you send me but i am trying to understand where did you get the calculations for in the worknotes tabel. I did my own calculation but i dont get the same answer. For example for year 2 for project A you have 39.8597 How did you get to that without using the formula in excel. I need to write down the actual numbers. I got 22.3214 some im not sure how you got to that number. Can you help me please? Thank you
Better plc is comparing two mutually exclusive projects, whose details are given below.The company’s cost of capital is 12 per cent.Project A Project B£m £mYear 0 (150) (152)Year 1 40 80Year 2 50 80Year 3 60 50Year 4 60 40Year 5 80 30(a). Using the net present value method, which project should be accepted?(b). Using the internal rate of return method, which project should be accepted?(c). If the cost of capital increases to 20 per cent in year 5, would your advice change? Hello.i have the solution you send me but i am trying to understand where did you get the calculations for in the worknotes tabel. I still cant calculate the IRR.i really dont understand how to do it. Can you help me please by using the numbers in the tabel so i can understand what is that you are adding or taking away please? I know how to calculate the NPV but not the IRR
Better plc is comparing two mutually exclusive projects, whose details are given below.The company’s cost of capital is 12 per cent.Project A Project B£m £mYear 0 (150) (152)Year 1 40 80Year 2 50 80Year 3 60 50Year 4 60 40Year 5 80 30(a). Using the net present value method, which project should be accepted?(b). Using the internal rate of return method, which project should be accepted?(c). If the cost of capital increases to 20 per cent in year 5, would your advice change? Hello.i have the solution you send me but i am trying to understand where did you get the calculations for in the worknotes tabel. I did my own calculation but i dont get the same answer. Could you show mw the calculation but not in excel please, i need the calculation by formula manually
3. Lopez Industries has identified the following two mutually exclusive capital investment projects: Year Project A Project B 0 1 2 3 4 -16000 400 800 13000 -15500 12500 8000 800 14000 800 What is the IRR for each of these projects? If you apply the IRR decision rule, which project should the company accept? Is this decision necessarily correct? If the required return is 11%, what is the NPV for each of these projects? Which project should the firm accept if they apply the NPV rule?
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Consider the cash flows for the investment projects given in Table. Assume that the MARR = 10%. (a) Suppose A, B, and C are mutually exclusive projects. Which project would be selected on the basis of the IRR criterion? (b) Assume that projects C and E are mutually exclusive. Using the IRR criterion, which Project would you select?. Net Cash Flow B D. E -4,850 2,100 2,100 2,500 4,250 3,200 2,850 800 300 4,250 4,250 2,850 2,900 1,050 500 -835 -835 -835 -835 1,500 3.250 1,600 1,200 2,100 2,100
Consider the following projects: Cash Flows ($) Project D E CO00 C101 -11,700 23,400 -21,700 37,975 Assume that the projects are mutually exclusive and that the opportunity cost of capital is 12%. a. Calculate the profitability index for each project. b-1. Calculate the profitability-index using the incremental cash flows. b-2. Which project should you choose?
The Webex Corporation is trying to choose between the following two mutually exclusive designprojects: Year Net Cash Flow Project - I($) Net Cash Flow Project - II($) 0 (53,000) (16,000) 1 27000 9100 2 27000 9100 3 27000 9100 (a) If the required return is 10% and the company applies the Profitability Index decision rule,which project should the firm accept?(b) If the company applies the Net Present Value decision rule, which project should it take?(c) Explain why your answers in (a) and (b) are different(d) Calculate the Internal Rate of Return of both projects.
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The Weiland Computer Corporation is trying to choose between the following mutually exclusive design projects, P1 and P2:Year 0123 Cash flows (P1) -$53,000 27,000 27,000 27,000 Cash flow (P2) -$16,000 9,100 9,100 9,100a. If the discount rate is 10 percent and the company applies the profitability index (PI) decision rule, which project should the firm accept?b. If the firm applies the Net Present Value (NPV) decision rule, which project should it take?c. Are your answers in (a) and (b) different? Explain why?