Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) -$ 15,530 0 -$ 243,567 27,200 1 55,000 60,000 413,000 234 5,173 8,261 13,237 8,729 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
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- Project S has a cost of $10,000 and is expected to produce benefits (cash flows) of $3,000 per year for 5 years. Project L costs $25,000 and is expected to produce cash flows of $7,400 per year for 5 years. Calculate the two projects’ NPVs, IRRs, MIRRs, and PIs, assuming a cost of capital of 12%. Which project would be selected, assuming they are mutually exclusive, using each ranking method? Which should actually be selected?Calculate the cash flows for each year. Based on these cash flows and the average project cost of capital, what are the projects NPV, IRR, MIRR, PI, payback, and discounted payback? Do these indicators suggest that the project should be undertaken?Calculate the project cash flows for each year. Based on these cash flows and the average project cost of capital, what are the projects NPV, IRR, MIRR, PI, payback, and discounted payback? Do these indicators suggest that the project should be undertaken?
- Foster Manufacturing is analyzing a capital investment project that is forecast to produce the following cash flows and net income: The payback period of this project will be: a. 2.5 years. b. 2.6 years. c. 3.0 years. d. 3.3 years.Start with the partial model in the file Ch10 P23 Build a Model.xlsx on the textbooks Web site. Gardial Fisheries is considering two mutually exclusive investments. The projects expected net cash flows are as follows: a. If each projects cost of capital is 12%, which project should be selected? If the cost of capital is 18%, what project is the proper choice? b. Construct NPV profiles for Projects A and B. c. What is each projects IRR? d. What is the crossover rate, and what is its significance? e. What is each projects MIRR at a cost of capital of 12%? At r = 18%? (Hint: Consider Period 7 as the end of Project Bs life.) f. What is the regular payback period for these two projects? g. At a cost of capital of 12%, what is the discounted payback period for these two projects? h. What is the profitability index for each project if the cost of capital is 12%?Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) -$ 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
- 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 the following two mutually exclusive projects: YEAR CASH FLOW (A) CASH FLOW (B)0 -$300,000 -$39,0001 20,000 18,0002 70,000 12,0003 80,000 18,0004 400,000 19,000 Whichever project you choose, if any, you require a 15 percent return on your investment.i) If you apply the payback period (PBP) criterion, which investment will you choose? Why?ii) If you apply the net present value (NPV) criterion, which investment will you choose? Why?iii) If you apply the profitability index (PI) criterion, which investment will you choose? Why?iv) If you apply the internal rate of return (IRR) criterion, which investment will you choose?Why?v) Based on your answers in (i) through (iv), which project will you finally…Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 -$ 54,000 -$ 23,000 1 12,700 11,600 2 23,200 11,200 3 27,600 4 46,500 12,500 6,000 Whichever project you choose, if any, you require a rate of return of 14 percent on your Investment. If you apply the payback criterion, you will choose Project NPV criterion, you will choose Project If you apply the IRR criterion, you will choose Project If you choose the profitability Index criterion, you will choose Project Based on your first four answers, which project will you finally choose? If you apply the
- Consider the following two mutually exclusive projects: Year Cash flow project A (RM) 0 1 2 3 4 -54,000 12,700 23,200 27,600 46,500 Cash flow Project B (RM) -23,000 11,600 11,200 12,500 6,000 Whichever project you choose, if you require a 14 percent return on your investment i) Compute the payback period for both project ii) Compute the Net Present Value (NPV) for both projects. iii) Which project do you prefer and which? Fully explain the result of your analysisConsider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 −$29,000 −$29000 1 14,400 4,300 2 12,300 9,800 3 9,200 15,200 4 5,100 16,800 a) What is the Internal Rate of Return (IRR) for each of these projects? b) Using the IRR decision rule, which project should the company accept? c) If the required return is 11 percent, what is the Net Present Value (NV) for each of these projects? d) Using the NPV decision rule, which project should the company accept? e) Why do you think the NPV and IRR rules do not agree on same project approval/rejection direction?Consider the following two mutually exclusive projects: Year Cash Flow(A) -$ 63,000 39,000 33,000 22,500 14,600 Cash Flow(B) -$ 63,000 25,700 29,700 35,000 24,700 4 1-What is the IRR for each project? Project A Project B % % 2.IF you apply the IRR decision rule, which project should ti 3.Assume the required return is 14 percent. What is the NP Project A Project B 0123