Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 -$215,000 -$ 57,000 34,000 32,900 24,300 45,000 51,000 270,000 3 4 18,300 17,800 The required return on these investments is 13 percent. a. What is the payback period for each project? Note: Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. b. 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. c. What is the IRR for each project? Note: Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16. d. 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. e. Based on your answers in (a) through (d), which project will you finally choose?

Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 -$215,000 -$ 57,000 34,000 32,900 24,300 45,000 51,000 270,000 3 4 18,300 17,800 The required return on these investments is 13 percent. a. What is the payback period for each project? Note: Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. b. 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. c. What is the IRR for each project? Note: Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16. d. 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. e. Based on your answers in (a) through (d), which project will you finally choose?

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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Consider the following information: Cash Flows ($) Project C0 C1 C2 C3 C4 A –5,300 1,300 1,300 2,700 0 B –700 0 600 2,300 3,300 C –5,200 3,400 1,700 800 300 a. What is the payback period on each of the above projects? (Round your answers to 2 decimal places.) b. Given that you wish to use the payback rule with a cutoff period of two years, which projects would you accept?multiple choice 1 Project A Project B and Project C Project A and Project B Project A, Project B, and Project C Project C Project A and Project C Project B None c. If you use a cutoff period of three years, which projects would you accept?multiple choice 2 Project A, Project B, and Project C Project A Project B Project A and Project C Project C Project A and Project B Project B and Project C d. If the opportunity cost of capital is 10%, which projects have positive NPVs?multiple choice 3 Project B Project C Project A,…
Bruin, Incorporated, has identified the following two mutually exclusive projects: Cash Flow (A) Cash Flow (6) -$ 28,000 -$ 28,000 3,900 9,300 Year 0 1 2 3 4 Project A Project B a-1 What is the IRR for each of these projects? (Do not round Intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) AN 13,400 11,300 8,700 4,600 Using the IRR decision rule, which project should the company accept? Project A Project B Ⓒ Project A O Project B Is this decision necessarily correct? 14,200 15,800 O No b- If the required return is 10 percent, what is the NPV for each of these projects? (Do 1. not round Intermediate calculations and round your answers to 2 decimal places, e.g. 32.16.) Which project will the company choose if it applies the NPV decision rule? O Project A O Project B Discount rate c. At what discount rate would the company be Indifferent between these two projects? (Do not round Intermediate calculations and enter your answer as a…
Wells, Inc., has identified an investment project with the following cash flows. Cash Flow $ 950 1,180 1,400 2,140 Year 1 ~34 2 a. If the discount rate is 8 percent, what is the future value of these cash flows in Year 4? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What is the future value at an interest rate of 11 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. What is the future value at an interest rate of 24 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) a. Future value at 8 percent b. Future value at 11 percent Future value at 24 percent c.
Consider the following information: Cash Flows ($) Project C0 C1 C2 C3 C4 A –5,300 1,300 1,300 2,700 0 B –700 0 600 2,300 3,300 C –5,200 3,400 1,700 800 300 a. What is the payback period on each of the above projects? (Round your answers to 2 decimal places.) b. Given that you wish to use the payback rule with a cutoff period of two years, which projects would you accept?multiple choice 1 Project A Project B and Project C Project A and Project B Project A, Project B, and Project C Project C Project A and Project C Project B None c. If you use a cutoff period of three years, which projects would you accept?multiple choice 2 Project A, Project B, and Project C Project A Project B Project A and Project C Project C Project A and Project B Project B and Project C d. If the opportunity cost of capital is 10%, which projects have positive NPVs?multiple choice 3 Project B Project C Project A,…
Consider the following two mutually exclusive projects: Year Cash Flow Cash Flow (X) (Y) 0 -$20,800 -$20,800 1 9,050 10,500 2 9,500 8,000 3 9,000 8,900 IRR Project X: 15.49% Project Y: 15.69% What is the crossover rate for these two projects? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Crossover rate ______%
a. They payback period of project A is ___ years (round to two decimal places) The payback period of project B is ____ years. (round to two decimal places) According to the payback method, which project should the firm choose? b. The NPV of project A is $___ The NPV of project B is $___ c. The IRR of project A is ___ The IRR of project B is ___ d. Make a reccomendation
Using the below informtion answer: 5.1 Payback Period of Project Tan (expressed in years, months and days). 5.2 Net Present Value of Project Tan.5.3 Accounting Rate of Return on average investment of Project Tan (expressed to two decimal places). INFORMATIONThe management of Mastiff Enterprises has a choice between two projects viz. Project Cos and Project Tan, each ofwhich requires an initial investment of R2 500 000. The following information is presented to you: PROJECT COS PROJECT TANNet Profit Net ProfitYear R1 130 000 80 0002 130 000 180 0003 130 000 120 0004 130 000 220 0005 130 000 50 000A scrap value of R100 000 is expected for Project Tan only. The required rate of return is 15%. Depreciation is calculatedusing the straight-line method.
If the cash flows for project A are C0 = −1,000; C1 = +600; C2 = +400; and C3 = +1,500, calculate the payback period. Group of answer choices 1 year Cannot be determined 3 Years 2 years
Mendez Company has identified an investment project with the following cash flows. Year Cash Flow 1 $770 2 1,030 3 1,290 4 1,400 a. If the discount rate is 10 percent, what is the present value of these cash flows? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What is the present value at 17 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. What is the present value at 25 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Consider the following two mutually exclusive projects: Year Cash Flow (X) Cash Flow (Y)0-$19.100-$ 19,100 18,625 9,650 2 8,650 7,575 3 8,575 8,475 Calculate the IRR for each project. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) What is the crossover rate for these two projects? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g.. 32.16.) What is the NPV of Projects X and Y at discount rates of 0 percent, 15 percent, and 25 percent?
Duo Corporation is evaluating a project with the following cash flows: Year Cash Flow 0 −$ 15,200 1 6,300 2 7,500 3 7,100 4 5,900 5 −3,300 The company uses an interest rate of 12 percent on all of its projects. Calculate the MIRR of the project using all three methods. Note: Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.
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