c) Project E, Project F and Project G are independent projects with conventional cash flows. The internal rates of return (IRR) are given below. Project E 17% Project F 12% Project G 19% IRR The cost of capital is 15% p.a. Indicate whether each project should be accepted by completing the following table. Input "Y" for accepting the project, "N" for rejecting the project, "Not Sure" if more information is required for making the decision. Project E (Y/N/Not Sure) Project F (Y/N/Not Sure) (YIN/Not Sure) Project G Decision

c) Project E, Project F and Project G are independent projects with conventional cash flows. The internal rates of return (IRR) are given below. Project E 17% Project F 12% Project G 19% IRR The cost of capital is 15% p.a. Indicate whether each project should be accepted by completing the following table. Input "Y" for accepting the project, "N" for rejecting the project, "Not Sure" if more information is required for making the decision. Project E (Y/N/Not Sure) Project F (Y/N/Not Sure) (YIN/Not Sure) Project G Decision

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Subject :- Accounting
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 $ 11,226 (10,000) Project B $ 10,568 (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 value $ $ $
In the estimation of incremental cash flows for a new project, several costs and issues are considered. In reference to the lecture materials for cash flow estimation, list the seven important issues to be kept track of in estimating incremental cash flows for expansion, replacement, or new capital projects. [No explanation is required for this part.]
This is a multiple choice question.
Calculate the NPVs of both Project X and Project Y. Show the NPVs for each project. If the Projects are Independent which would you approve? If the Projects are Mutually Exclusive which would you approve?
1. Define capital expenditures and provide examples of capital expenditures.2. Cash flows for a particular project should be measured on an incremental basis. What does that mean?3. How does the opportunity cost concept affect capital budgeting cash flow determination?4. What factors should be considered when estimating a new business’ NINV? Is it any different for an asset replacement project. 5. Why is depreciation, a noncash expense, considered when estimating a project’s net cash flows?6. What are the potential tax consequences of selling an old asset in an asset replacement investment decision?
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?
Compute the NPV statistic for Project Y if the appropriate cost of capital is 13 percent. (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your final answer to 2 decimal places.) Project Y Time: 0 1 2 3 4 Cash flow: −$9,100 $3,570 $4,400 $1,740 $520 Should the project be accepted or rejected?multiple choice accepted rejected
Compute the Pl statistic for Project X and note whether the firm should accept or reject the project with the cash flows shown as follows if the appropriate cost of capital is 10 percent. Time: Cash flow: Multiple Choice 0 1 -250 75 -0.0977 percent, reject 24.41 percent, accept -9.77 percent, reject -24.41 percent, reject 2 0 3 100 4 5 75 50
The average accounting rate of return (AAR): Select one: A. is the best method of financially analysing mutually exclusive projects. B. is similar to the return on assets ratio. C. measures net income as a percentage of the sales generated by a project. D. considers the time value of money. E. is the primary methodology used in analyzing independent projects.

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