Consider the following projects: Cash Flows (S) 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?

Consider the following projects: Cash Flows (S) 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?

Name: Consider the following projects:Cash Flows ($)ProjectDECO00 C101-11,7
Uploaded: 2024-03-20T06:50:59.000Z
Channel: Bartleby
Description: Consider the following projects:Cash Flows ($)ProjectDECO00 C101-11,700 23,400-21,700 37,975Assume that the projects are mutually exclusive and that the opportunity cost ofcapital is 12%.a. Calculate the profitability index for each project.b-1. Cal

Financial Management: Theory & Practice

16th Edition

ISBN:9781337909730

Author:Brigham

Publisher:Brigham

Chapter10: The Basics Of Capital Budgeting: Evaluating Cash Flows

Section: Chapter Questions

Problem 23SP: Start with the partial model in the file Ch10 P23 Build a Model.xlsx on the textbooks Web site....

See similar textbooks

Similar questions

Consider the following projects: Cash Flows ($) Co Project D E -11, 100 -21, 100 C₁ 22, 200 34,500 Assume that the projects are mutually exclusive and that the opportunity cost of capital is 11%. 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?
Consider the following two mutually exclusive projects:Year Cash Flow (X) Cash Flow (Y)0 -$365,000 -$38,0001 25,000 16,0002 65,000 12,0003 65,000 17,0004 425,000 15,000Whichever project you choose, if any, you require a 13 percent return on your investment. i. Which investment will you choose if you use the payback decision criteria? Justify your answer.ii. Which investment will you choose if you use the NPV decision criteria? Justify your answer.iii. Which project will you choose ultimately based on your answers above?
Consider projects A and B with the following cash flows: Ce $32 57 $16 +$16 + 32 +$ 16 32 a-1. What is the NPV of each project if the discount rate is 12%? (Do not round intermediate calculations. Round your answers to 2 decimal places.) 6-2. Which project has the higher NPV? b-1. What is the profitability Index of each project? (Do not round intermediate calculations. Round your answers to 2 decimal places.) b-2. Which project has the higher profitablity index? c. Which project is most attractive to a firm that can ralse an unlimited amount of funds to pay for its investment projects? d. Which project is most attractive to a firm that is limited in the funds it can ralse? ok nt mces Project A Project B a-1. NPV of ench project if the discount rate is 12% a-2. Which project has the higher NPV? b-1. Profitability index of each projoct b-2. Which project has the higher protitability index? Which project is most attractive to a firm that can raise an unlimited amount of funds to pay for…
Consider projects A and B with the following cash flows: C0 C1 C2 C3 A − $ 27 + $ 16 + $ 16 + $ 16 B − 52 + 27 + 27 + 27 a-1. What is the NPV of each project if the discount rate is 10%? (Do not round intermediate calculations. Round your answers to 2 decimal places.) a-2. Which project has the higher NPV? b-1. What is the profitability index of each project? (Do not round intermediate calculations. Round your answers to 2 decimal places.) b-2. Which project has the higher profitability index? c. Which project is most attractive to a firm that can raise an unlimited amount of funds to pay for its investment projects? d. Which project is most attractive to a firm that is limited in the funds it can raise?
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 cash flows for the following investment projects (MARR = 15 %). Suppose that projects are mutually exclusive. Which project would you select based on AE criterion? Project A -3000 Project B -3500 ProjectC 4000 1400 1100 1500 2. 1650 1000 1500 3. 1300 1000 1800 1800 4 750 1000
11. IRR rule (S5.3) Consider the following two mutually exclusive projects: Cash flows ($) Project A B Co -50 -50 C₁ +60 0 C₂ +60 0 0 +140 Page 142 a. Calculate the NPV of each project for discount rates of 0%, 10%, and 20%. Plot these on a graph with NPV on the vertical axis and discount rate on the horizontal axis. b. What is the approximate IRR for each project? c. In what circumstances should the company accept project A? d. Calculate the NPV of the incremental investment (B – A) for discount rates of 0%, 10%, and 20%. Plot these on your graph. Show that the circumstances in which you would accept A are also those in which the IRR on the incremental investment is less than the opportunity cost of capital.
Consider the cash flows for the investment projects given in Table. Assume that the MARR = 10%. (a) Suppose A, B, and C are mutually exclusive projects. Which project would be selected on the basis of the IRR criterion (b) Assume that projects C and È are mutually exclusive. Using the IRR criterion, which Project would you select? Net Cash Flow A В C D E -4,250 3,200 2,850 -4,250 1,500 3,250 1,600 1,200 -4,250 2,850 -4,850 2,100 2,100 2,100 2,100 2,500 1 -835 2,900 1,050 500 2 -835 3 800 -835 4 300 -835
Consider the following two projects: Cash flows Project A Project B C0�0 −$ 240 −$ 240 C1�1 100 123 C2�2 100 123 C3�3 100 123 C4�4 100 a. If the opportunity cost of capital is 8%, which of these two projects would you accept (A, B, or both)? b. Suppose that you can choose only one of these two projects. Which would you choose? The discount rate is still 8%. c. Which one would you choose if the cost of capital is 16%? d. What is the payback period of each project? e. Is the project with the shortest payback period also the one with the highest NPV? f. What are the internal rates of return on the two projects? g. Does the IRR rule in this case give the same answer as NPV? h. If the opportunity cost of capital is 8%, what is the profitability index for each project? i. Is the project with the highest profitability index also the one with the highest NPV? j. Which measure should you use to choose between the projects?
Consider the following two projects: cash flows Project A Project B c0 -270 -2170 c1 115 143 c2 115 143 c3 115 143 c4 115 a. If the opportunity cost of capital is 10%, which of these 2 projects would you accept? b. Suppose that you can choose only one of these two projects. Which would you choose? The discount rate is still 10%. c. Which one would you choose if the cost of capital is 15%? d. What is the payback period for every project? e. Is the project with the shortest payback period also the one with the highest NPV? f. What are the internal rate of return on the two projects? g. Does the IRR rule in this case gives the same answer as NPV? h1. If the opportunity cost of capital is 10%, whats is the profitability index for each project? h2. Is the project with the highest profitability index also the…
Consider the cash flow of the two projects depicted in Table 3. If WiseGuy Inc. uses payback period rule to choose projects, which of the projects (Project A or Project B) will rank highest? TABLE 3 Project A Project B Time 0. -11,000. -10,000 Time 1. 3,000. 4,000 Time 2. 8,000. 3,000 Time 3. 3,000. 10,000 A) Project A B) Project B C) Project A and Project B have the same ranking. D) It cannot calculate a payback period without a discount rate. 7 Consider the cash flow of the two projects depicted in Table 3. If WiseGuy Inc. uses IRR rule to choose projects, which of the projects (Project A or Project B) will rank highest? A) Project A B) Project B C) Project A and Project B have the same ranking. D) It cannot calculate a payback period without a discount rate.
Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) -$ 15,456 5,225 8,223 13,013 8,705 0 1 234 -$ 276,363 26,400 51,000 57,000 402,000 Whichever project you choose, if any, you require a 6 percent return on your investment. a. What is the payback period for Project A? Payback period b. What is the payback period for Project B? Payback period c. What is the discounted payback period for Project A? Discounted payback period