Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) -$ -$ 0 348,000 51,000 1 47,000 24,200 2 67,000 22,200 3 67,000 19,700 4 442,000 14,800 Whichever project you choose, if any, you require a return of 14 percent on your investment. a-1.What is the payback period for each project? (Do not round intermed calculations and round your answers to 2 decimal places, e.g., 32.16.) Project A Project B 72 a- 2. Payback period years years If you apply the payback criterion, which investment will you choose? 13

Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) -$ -$ 0 348,000 51,000 1 47,000 24,200 2 67,000 22,200 3 67,000 19,700 4 442,000 14,800 Whichever project you choose, if any, you require a return of 14 percent on your investment. a-1.What is the payback period for each project? (Do not round intermed calculations and round your answers to 2 decimal places, e.g., 32.16.) Project A Project B 72 a- 2. Payback period years years If you apply the payback criterion, which investment will you choose? 13

Name: Raghubhai Problem 9-17 Comparing Investment Criteria [LO1, 2, 3, 5, 7]
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Description: Raghubhai Problem 9-17 Comparing Investment Criteria [LO1, 2, 3, 5, 7]Consider the following two mutually exclusive projects:Year Cash Flow (A) Cash Flow (B)-$$-0348,00051,000147,00024,20023467.00022,20067,00019,700442,00014,800Whichever project you

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....

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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%?
Comparing Investment Criteria [L01,2,3,5,7] Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 -$300,000 -$40,000 1 20,000 19,000 2 50,000 12,000 3 50,000 18,000 4 390,000 10,500 Whichever project you choose, if any, you require a 15 per cent return on your investment. a. If you apply the payback criterion, which will you choose? Why? b. If you apply the discounted payback criterion, which investment will you choose? Why? c. If you apply the NPV criterion, which investment will you choose? Why? d. If you apply the IRR criterion, which investment will you choose? Why? e. If you apply the profitability index criterion, which investment will you choose? Why? f. Based on your answers in (a) through (e), which project will you finally choose? Why? Please explain your calculations and conclusions
Problem 7: NPV versus IRR. Consider the following two mutually exclusive projects: Year Cash flow Cash flow (X) (Y) O 1 2 3 -9500 5800 4000 4000 PART 7A: The NPV for X is $ Answer: 2083.77 -9500 3500 5000 6000 if the required rate of return is 10%.
17: Consider the following 2 mutually exclusive projects: Year Cash flow A Cash Flow B 0 -291000 -41600 1 37000 20000 2 55000 17600 3 55000 17200 4 366000 14000 Whichever project you choose, if any, you require a return of 11% on your investment. If you apply the payback criterion, which investment will you choose? Why? If you apply the discounted payback criterion, which investment will you choose? Why? If you apply the NPV criterion, which investment will you choose? Why? If you apply the IRR criterion, which investment will you choose? Why? If you apply the profitability index criterion, which investment will you choose? Why? Based on your answers in parts A through E, which project will you finally choose? Why?
Question 9 Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 -$50,000 -$25,000 1 $25,000 $10,000 2 $10,000 $10,000 3 $10,000 $10,000 4 $20,000 $5,000 Whichever project you choose, if any, you require a 10 percent return on your investment. If you apply the payback criterion, you will choose investment _____, if you apply the NPV criterion, you will choose investment _____; if you apply the IRR criterion, you will choose investment ____; if you choose the profitability index criterion, you will choose investment ____. Based on your first four answers, which project will you finally choose? Group of answer choices A; A; A; A; A A; B; A; A; A B; A; A; A; A A; B; B; B; B B; B; B; B; B
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?
Question 25 Jefferson International is trying to choose between the flowing two mutually exclusive design projects: Year Cash Flow (A) Cash Flow (B) 0 -$79,000 -$12,500 1 18,500 5,800 2 39,600 21,800 3 48,700 25,600 The required rate of return is 9 percent. Project A has a profitability index of 1.3 and project B has a profitability index of 1.24. Which project should the firm accept and why? Choose the answer with the "best" reasoning. Group of answer choices Project A because it has a higher profitability index Project B because it has a higher profitability index Project A because it has a higher NPV Project B because it has a higher NPV Project B because it has a higher profitability index and NPV
Exhibit 8-3A firm is evaluating two investment proposals. The following data is provided for the two investment alternatives. Initial cash outflow IRR NPV(@14%) Project 1 $350m 28% $80m Project 2 $ 20m 36% $20m Refer to Exhibit 8-3. If the two projects are mutually exclusive, which project should the firm choose? What is the problem that the firm should be concerned with in making this decision? Group of answer choices project 1; project scale project 2; discount rate project 1; discount rate project 2; project scale
Exhibit 2.3A Examp'e Comparing Two Projects Using the Payback Method Project A Project B Formulas Investment Annual saving 5750,000 5215,000 $250.000 580,000 Project A Payback 07/D8) Project B Payback (7/P8) Payback Period" Rate of Return"* Project A: Rate of Return (06/D7) Project D. Rate of Return (F8/P7) Accept/Reject Exclanetion Project A Accept/Reject Accept is Payback<5 Years and Rate of Return 15% Project B * Note: Parbnck does not use she time valce of money ** Note: Rate of returnis reciprocalof Fayback
Problem 8-25 Profitability Index versus NPV (L03) Consider projects A and B with the following cash flows: A B Co -$44 -69 C1 +$ 28 +38 C₂ +$ 28 +$ 28 +38 +38 B a-1. What is the NPV of each project if the discount rate is 12%? Note: 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? Note: Do not round intermediate calculations. Round your answers to 2 decimal places. a-2. Which project has the higher NPV? 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? a-1. NPV of each project if the discount rate is 12% a-2. Which project has the higher NPV? b-1. Profitability index of each project b-2. Which project has the higher profitability index? c. Which…
Question The following economical indictors are referring to types of project (A and B). Answer the following points according to these given indictors in the tables. project A:r=8% project B: r=8% year cash flow (CF) year cash flow (CF) 0 -598 0 -384 1 110 1 105 2 170 2 105 3 210 3 95 4 320 4 118 A) If you are aware that( r%) percentages are various for different reasons to be (10% and 20%). So determine level of NPV during your analysis procedures for whole the mentioned cases of (% r) for each project? B) Which one of the mentioned project are more economically by using concept of IRR and take the range of (% r) between (9% to %25) for supporting your answers? C) Drawing out all the levels of various of the project for each cases of (r %) which given initially in point (A) above. D) Give clear justification about any of the above project more feasible?
の Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) -$ -$ 0 354,000 48,000 1 41,000 23,600 234 61,000 21,600 61,000 19,100 436,000 14,200 Whichever project you choose, if any, you require a return of 14 percent on your investment.