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A company is considering two mutually exclusive projects. Both require an initial cash outlay of Rs.20000 each and have a life of five years. The company's required
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- Project A costs $5,000 and will generate annual after-tax net cash inflows of $1,800 for five years. What is the NPV using 8% as the discount rate?A company is considering two mutually exclusive projects. Both require an initial cash outlay of Rs.20000 each and have a life of five years. The company’s required rate of return is 10% and pays tax at a 35% rate. The projects with be depreciated on a straight-line basis. The before taxes cash flows expected to be generated by the projects are as follows. Before-tax cash flows (Rs.) Project1 2 3 45 A 8000 8000 8000 8000 8000B 12000 6000 4000 10000 10000 calculate for each project. The NPV and the internal rate of return. Which project should be accepted and why.A company is considering two mutually exclusive projects. Both require an initial cash outlay of Rs.20000 each, and have a life of five years. The company's required rate of return is 10% and pays tax at a 35% rate. The projects with be depreciated on a straight-line basis. The before taxes cash flows expected to be generated by the projects are as follows. Before-tax cash flows (Rs.) Project 1 2 3 4 5 A 8000 8000 8000 8000 8000B 12000 6000 4000 10000 10000 calcualte for each project: The NPV and the internal rate of return. Which project should be accepted and why.
- A company is considering two mutually exclusive projects. Both require an initial cash outlay of Rs 10,000 each, and have a life of five years. The company’s required rate of return is 10 per cent and pays tax at a 50 per cent rate. The projects will be depreciated on a straight –line basis. The before taxes cash flows expected to be generated by the projects are as follows:ProjectBefore –tax Cash Flow (Rs)1 2 3 4 5A 4,000 4,000 4,000 4,000 4,000B 6,000 3,000 2,000 5,000 5,000Calculate for each project: 1. The payback2. The average rate of return3. The net present value and profitability index4. The internal rate of return .Which project should be accepted and why?a company is considering two mutually exclusive projects. Both require an initial cash outlay of Rs.20000 each, and have a life of five years. The company's required rate of return is 10% and pays tax at a 35% rate. The projects will be depreciated on a straight line basis. The before taxes cash flows expected to be generated by the projects are as follows. Before tax cash flows (Rs.) Project A - 1 2 3 4 5 is 8000 8000 8000 8000 8000 Project B - 1 2 3 4 5 is 12000 6000 4000 10000 10000 Calculate for each project : the NPV and the internal rate of return. Which project should be accepted and why.Annapurna Trading Ltd. is evaluating two mutually exclusive projects: Project A and Project B. The company will require Rs 140,000 for Project A and Rs 100,000 for Project B. The net cash outflow and profit after tax of these projects are as follows: Year Cash Flows Year A B -Rs 140,000 -Rs 100,000 Profit after taxes 1 Rs 25,000 Rs 10,000 2 25,000 15,000 3 25,000 20,000 4 25,000 25,000 5 25,000 35,000 Both projects will be depreciated on straight line over a five-year life and cost of capital of the company is 12 percent. Calculate the PBP of each project. If firm has set a maximum payback period of three years, suggest as to which project is preferred.
- Annapurna Trading Ltd. is evaluating two mutually exclusive projects: Project A and Project B. The company will require Rs 140,000 for Project A and Rs 100,000 for Project B. The net cash outflow and profit after tax of these projects are as follows: Year Cash Flows Year A B -Rs 140,000 -Rs 100,000 Profit after taxes 1 Rs 25,000 Rs 10,000 2 25,000 15,000 3 25,000 20,000 4 25,000 25,000 5 25,000 35,000 Both projects will be depreciated on straight line over a five-year life and cost of capital of the company is 12 percent. Calculate the PBP of each project. If firm has set a maximum payback period of three years, suggest as to which project is preferred. What are the average rate of returns of both projects? Evaluate the projects on the basis of their NPV. What are the profitability indexes of both projects?A company has an investment opportunity costing Rs.1,20,000 with the cashflow after tax: Rs. 25,000, Rs. 30000, Rs. 35,000, Rs. 40,000 and Rs. 45,000 for the estimated life of 5 years. Evaluate the project by using Payback period, NPV and PI methods if required rate of return is 10%.Stenson, Inc., imposes a payback cutoff of three years for its international investment projects. Assume the company has the following two projects available. Year Cash Flow A Cash Flow B 0 –$ 49,000 –$ 94,000 1 19,000 21,000 2 25,400 26,000 3 21,000 33,000 4 7,000 246,000 What is the payback period for each project? Project A: _____ years Project B: _____ years
- There are two projects, X and Y. Each project requires an investment of $20,000. The Company’s WACC is 10%. Net profit before depreciation and after tax Years Project X Project Y 1 4,000 5000 2 6,000 7000 3 8,000 9000 4 10000 11000 5 12000 12000 You are required to rank these projects according to the pay back method and NPV from the above information using discounted cash flow. Advice the company’s management on the choice of the projectThe Carlo Company has been allocated RM600,000 on investment projects for the coming year. Four projects, each with a four year life and with the following cash flows are currently being considered: Year 0 1 2 3 4 Project RMk RMk RMk RMk RMk A -300 100 10 200 200 В -200 0 400 -100 0 80 80 D -150 60 60 60 60 1. Distinguish between hard and soft capital rationing 2. Assuming that the projects are divisible recommend to the Board, which projects should be accepted using the Net Present Value method and evaluate the total net present value that would be generated 3. Discuss the impact on your analysis of each project being indivisibleThe Carlo Company has been allocated RM600,000 on investment projects for the coming year. Four projects, each with a four year life and with the following cash flows are currently being considered: Year 0 1 2 3 4 Project RMk RMk RMk RMk RMk A -300 100 10 200 200 B -200 0 0 0 400 C -100 0 0 80 80 D -150 60 60 60 60 Distinguish between hard and soft capital rationing Assuming that the projects are divisible recommend to the Board, which projects should be accepted using the Net Present Value method and evaluate the total net present value that would be generated Discuss the impact on your analysis of each project being indivisible
