Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 –$ 410,000 –$ 68,000 1 66,000 30,000 2 86,000 28,000 3 71,000 25,500 4 446,000 20,600 1) Whichever project you choose, if any, you require a 15% return on your investment. What is the payback period for each project? What is the discounted payback period for each project? What is the NPV for each project? What is the IRR for each project? What is the profitability index for each project? I only have one question left so I would really appreciate it if you could help with all the questions thanks.

Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 –$ 410,000 –$ 68,000 1 66,000 30,000 2 86,000 28,000 3 71,000 25,500 4 446,000 20,600 1) Whichever project you choose, if any, you require a 15% return on your investment. What is the payback period for each project? What is the discounted payback period for each project? What is the NPV for each project? What is the IRR for each project? What is the profitability index for each project? I only have one question left so I would really appreciate it if you could help with all the questions thanks.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 7P

See similar textbooks

Related questions

Q: PI of a project tha

A: PI (Profitability Index) is defined as one of the techniques of capital budgeting. This technique…

Q: Project Y has initial cost of $7,000, and the discount rate for each project is 6%. Expected cash…

A: Given Data: Discount Rate = 6% Intial Investment 7000 Cash FLow : Year 1 2000 Year 2 2500…

Q: Consider the following cash flows for two mutually exclusive capital investment projects. The…

A: Mutually exclusive projects are a set of projects out of which only one project can be accepted.

Q: Following table shows the initial investment required in and cash flow (return) from a project…

A: Capital Budgeting Techniques are used to choose the most profitable investment alternative. Based on…

Q: Use the following information to answer questions 11-15: A firm evaluates a project with the…

A: Calculation of Payback Period, Discounted Payback Period and Profitability Index: Excel Spreadsheet:…

Q: Please calculate the payback period, IRR, MIRR, NPV, and PI for the following two mutually exclusive…

A: Capital budgeting is the process by which investors determine the value of a potential investment…

Q: Suppose that cash flows of a project are given as follows: Year 0: Costs: $150,000. Year 1: Costs:…

A: Payback Period - It is the duration of the project life within which the initial investment is…

Q: The total investment required for two projects are estimated at OMR100, 000. The cash flows expected…

A: Year Cash flow Cumulative cash flow 1 18000 18000 2 28500 46500 3 42000 88500 4 48000 136500

Q: 00 12,000 3 50,000 18,000 4 390,000…

A: Cash flow analysis is important for the business since it allows the business to assess the amount…

Q: Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow…

A: Formulas:

Q: Wang Food Market, Inc. has given you the following information on the two mutually exclusive…

A: Profitability Index =PV of cash in flows / Initial Investment Payback Period = (Initial Investment /…

Q: Consider the following two mutually exclusive projects: Cash Flow (B) Cash Flow (A) $-300,000 20,000…

A: Net present value (NPV) is the difference between the present value of cash inflows and the present…

Q: Two mutually exclusive investment projects have the following forecasted cash flows: Year A B…

A: IRR is the internal rate of return a project generates in its lifetime expressed in annual terms. It…

Q: Consider the following two mutually exclusive projects: Cash Flow (A) $-300,000 20,000 50,000 50,000…

A: Formulas: Payback period = Last period with negative cashflows + Last negative cumulative cash…

Q: Kenny, Inc. has identified the following two mutually exclusive projects. Project A -$25,000 20,000…

A: “Since you have posted a question with multiple sub-parts, we will solve first three sub-parts for…

Q: Suppose you are given the cash flows for a project with the following cash flows. The cost of…

A: The discounted payback period is the overall expected time required to recover the initial cost in…

Q: a. Consider the following mutually exclusive project below. Whichever project chosen, a 15 percent…

A: The discounted payback period is a capital budgeting procedure used to determine the profitability…

Q: In the table below you have information concerning a project, (t) represents the year, (r) is the…

A: Cash inflow represents the cash receipt of the company whereas, cash outflow represents the cash…

Q: You are considering two mutually exclusive projects with the following cash flows. The discount rate…

A: Pay back period is the amount of years required to recover the initial investment of the project and…

Q: Use the following information to answer questions 11-15: A firm evaluates a project with the…

A: Therefore, the net present value is OMR 8,893.62.

Q: The following table gives the cash flows for Project A and Project B: Year Project A Project B -3000…

A: You should invest in the project with higher NPV

Q: Consider the following cash flows for two mutually exclusive capital investment projects. The…

A: PROJECT B Year Cash flows 0 -20000 1 6000 2 6000 3 6000 4 5400 5 5400 6 5400

Q: Consider the following two mutually exclusive projects: Year Cash flow project A (RM) -54,000 12,700…

A: Pay Back period is the method under Capital budgeting which help in decision making in this Capital…

Q: Suppose a project has the following cash flows. What is the NPV if the cost of the project is…

A: NPV stands for the net present value wherein the present value of cash inflows is equal to the…

Q: You must analyze two projects, X and Y. Each project costs $10,000 and the firm's WACC is 14%. The…

A: Hi! Thank you for the question, As per the honor code, we are allowed to answer three sub-parts at a…

Q: Your firm has estimated the following cash flows for two mutually exclusive capital investment…

A: The internal rate of return (IRR) of a project is defined as the discount rate which produces a zero…

Q: 1. The Bolster Company is considering two mutually exclusive projects: Year Cash Flow A Cash Flow B…

A: given, year A B 0 -100000 -100000 1 31250 0 2 31250 0 3 31250 0 4 31250 0 5 31250…

Q: If you apply the IRR decision rule, which investment will you choose? Why?

A: Internal rate of return is the rate at which the net present value of cash flows of the project…

Q: What is the payback period of a project that has \$5 540,000 in initial investment , \$150,000 in…

A: Net annual cash flows = Annual cash inflows - Annual cash outflows = 150,000 - 60,000…

Q: Whichever project you choose, if any, you require a return of 14 percent on your investment.…

A: Formulas:

Q: Acme Mfg is considering two projects, A & B, with cash flows as shown below: period…

A: Discounted Payback Period is one of the capital budgeting techniques. In this technique, the cash…

Q: Consider the following cash flows: Year 0 1 2 3 4 5 6 Cash Flow -$8,000 $3,000 $3,600 $2,700…

A: Since you have asked a question with multiple parts, we will solve the first 3 parts for you as per…

Q: Use the following information to answer questions 11-15: A firm evaluates a project with the…

A: We’ll answer the first question since the exact one wasn’t specified. Please submit a new question…

Q: Referring to the table below, calculate the Net Present Value (NPV) and Profitability Index (PI).…

A: Net present value is the sum of all the discounted cash flows during the tenure of the investment.…

Q: 21

A: Profitability index is the ratio between the initial investment made and the present value of future…

Q: 1. Project L costs $40,000, its expected cash inflows are $13,000 per year for 7 years, and its WACC…

A: “Hey, since there are multiple questions posted, we will answer first question. If you want any…

Q: Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0…

A: Since you have posted a question with multiple sub-parts, we will solve the first three subparts for…

Q: a. Consider the following mutually exclusive project below. Whichever project chosen, a 15 percent…

A: Capital budgeting indicates the evaluation of the profitability of possible investments and projects…

Q: The total investment required for a project is estimated at OMR100, 000. The cash flows expected…

A: The payback period is the amount of time required for cash inflows generated by a project to…

Q: Suppose your firm is considering two mutually exclusive, required projects with the cash flows shown…

A: A method of capital budgeting that helps to evaluate the present worth of cash flow and a series of…

Q: Acme Mfg is considering two projects, A & B, with cash flows as shown below: period…

A: Introduction Discounted Payback Period: Discounted payback period is a form of payback period that…

Q: BAG Corporation is considering the following two projects; namely Project X and Project Y: Project Y…

A: YEAR PROJECT X PROJECT X PROJECT X PROJECT Y PROJECT Y PROJECT Y CASH FLOW ACC. CASH FLOW CAL.…

Q: Use the following information to answer questions 11-15: A firm evaluates a project with the…

A: Net Present Value Net present value (NPV) is the present value of cash flows. It is the difference…

Q: Please calculate the payback period, IRR, MIRR, NPV, and PI for the following two mutually exclusive…

A: Formulas:

Concept explainers

Present Value

Present value (PV) is defined as the current or present value of all future sums of cash flow or money at a specified rate of return. This rate of return is known as the discounted rate, which is essentially the interest rate, discounted over some time. The expected cash flows are discounted at a discount rate to compute the present value. The higher the discount rate, the higher the future value (FV), but the lower the present value.

Question

100%

Consider the following two mutually exclusive projects:

Year	Cash Flow (A)		Cash Flow (B)
0	–$	410,000		–$	68,000
1		66,000			30,000
2		86,000			28,000
3		71,000			25,500
4		446,000			20,600

Whichever project you choose, if any, you require a 15% return on your investment.

What is the payback period for each project?

What is the discounted payback period for each project?

What is the NPV for each project?

What is the IRR for each project?

What is the profitability index for each project?

I only have one question left so I would really appreciate it if you could help with all the questions thanks.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Payback period

VIEW

Discounted payback period

VIEW

Net present value

VIEW

Internal rate of return

VIEW

Profitability index

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 6 steps with 10 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

Consider the following two mutually exclusive projects: Cash Flow (A) $-300,000 20,000 50,000 50,000 Cash Flow (B) $-40,000 19,000 12,000 18,000 10,500 Year 2 3 4 390,000 Whichever project you choose, if any, you require 15 percent return on your investment. a) If you apply the payback criterion, which investment will you choose? Why? b) If you apply the NPV criterion, which investment will you choose? Why? c) If you apply the IRR criterion, which investment will you choose? Why? d) If you apply the profitability index, which investment will you choose? Why?
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 two mutually exclusive projects with the following expected cash flows and a required rate of return of 12% Cash Flows Year Project A Project B 0 -75,000 -100,000 1 60,000 60,000 2 30,000 50,000 3 30,000 60,000 (a) If you apply the discounted payback criterion, which investment will you choose? Why? (b) If you apply the NPV criterion, which investment will you choose? Why? (c) Based on your answers in (a) and (b), which project will you finally choose? Why ? (i.e clearly explain the strengths and the weaknesses of each method therefore the reason(s) for choosing the project based on the chosen method)
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 two mutually exclusive projects with the following expected cash flows : Cash Flows Year Project C Project D 0 -15,000 -21,000 1 6,000 6,000 2 12,000 16,000 3 8,000 14,000 Whichever project you choose, if any, you require a return of 12% on your investment. a. If you apply the discounted payback criterion, which project will you choose? Why? b. If you apply the NPV criterion, which project will you choose? Why? c. Based on your answers in (a) and (b), which project will you finally choose? Why ? (i.e clearly explain the strengths and the weaknesses of each method therefore the reason(s) for choosing the project based on the chosen method)
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 analysis
You are considering the following two mutually exclusive projects. The required rate of return is 11.25% for project A and 10.75% for project B. Which project should you accept? YEAR PROJECT A PROJECT B 0 -$48,000 -$126,900 1 $18,400 $69.700 2 $31,300 $80,900 3 $11,700 $0
A) Consider the following two mutually exclusive projects: Cash flow (A) -RM300,000 20,000 50,000 50,000 390,000 i) ii) Year 0 1 2 3 4 Cash flow (B) -RM40,000 19,000 12,000 18,000 10,500 If you apply the payback criterion, which investment will you choose if you set the maximum payback period of 3 years? If you apply the internal rate of return (IRR) criterion, which investment will you choose, if you require a 15% return?
Consider the following two mutually exclusive projects: Year Cash Flow(A) Cash Flow(B) 0 –$ 342,000 –$ 50,500 1 53,000 24,800 2 73,000 22,800 3 73,000 20,300 4 448,000 15,400 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 intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) a-2 If you apply the payback criterion, which investment will you choose? Project A Project B b-1 What is the discounted payback period for each project? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) b-2 If you apply the discounted payback criterion, which investment will you choose? Project A Project B c-1 What is the NPV for each…
Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 -$240,000 -$150,000 1 $100,000 $100,000 2 $95,000 $50,000 3 $45,000 $5,000 4 $90,000 $3,000 Whichever project you choose, if any, you require a return of 13% on your investment. a. If you apply the payback criterion, which investment will you choose? Why? b. If you apply the NPV criterion, which investment will you choose? Why? c. Based on your answers in (a) and (b), which project will you finally choose? Why?