Fabulous Fabricators needs to decide how to allocate space in its production facility this year. It is considering the following contracts: a. What are the profitability indexes of the projects? b. What should Fabulous Fabricators do? HEER a. What are the profitability indexes of the projects? (Round to two decimal places.) The profitability index for contract A is The profitability index for contract B is (Round to two decimal places.) The profitability index for contract C is (Round to two decimal places.) b. What should Fabulous Fabricators do? (Select the best choice below.) O A. Since the NPV of A is the largest, it should choose A. O B. It should take the two projects with the highest profitability indexes: C and A. OC. Since it has the capacity to do both B and C and NPVB + NPVC is greater than NPVA. it should do both B and C. O D. Since the profitability index for C is the largest, it should choose C.

Fabulous Fabricators needs to decide how to allocate space in its production facility this year. It is considering the following contracts: a. What are the profitability indexes of the projects? b. What should Fabulous Fabricators do? HEER a. What are the profitability indexes of the projects? (Round to two decimal places.) The profitability index for contract A is The profitability index for contract B is (Round to two decimal places.) The profitability index for contract C is (Round to two decimal places.) b. What should Fabulous Fabricators do? (Select the best choice below.) O A. Since the NPV of A is the largest, it should choose A. O B. It should take the two projects with the highest profitability indexes: C and A. OC. Since it has the capacity to do both B and C and NPVB + NPVC is greater than NPVA. it should do both B and C. O D. Since the profitability index for C is the largest, it should choose C.

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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K Fabulous Fabricators needs to decide how to allocate space in its production facility this year is considering the following contra a. What are the profitability indexes of the projects? b. What should Fabulous Fabricators de? What are the profitability indexes of the projects? The profitability index for contract Ais (Round to be decimal places) Round to two decimal places) The profitablity index for contract Dis The profitability index for contract CH b. What should Fabulous Fabrators do? (Select the best choice below) OA It should take the two projects with the highest profitability indexes C and A OB. Since it has the capacity to do both Band C and NPV NPV is greater than NPV, it should do to and C OC. Since the NPV of A is the largest, it should choose A OD. Since the profitability indes for the largest, it should choose C Data table (Click on the following icon in order to copy its contents into a spread) Contract Use of Facility 100% 55% 45% C $2.02 m $105 min $1.46 milion…
Fabulous Fabricators needs to decide how to allocate space in its production facility this year. It is considering the following contracts: a. What are the profitability indexes of the projects? b. What should Fabulous Fabricators do? a. What are the profitability indexes of the projects? The profitability index for contract A is (Round to two decimal places.) Data table (Click on the following icon in order to copy its contents into a spreadsheet.) NPV Use of Facility Contract A $1.99 million 100% $0.96 million 50% $1.52 million 50% B с Print ACCES Done - X
Fabulous Fabricators needs to decide how to allocate space in its production facility this year. It is considering the following contracts: (a) Invest in A (b) Invest in C (c) Invest in C and B (d) Invest in B
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
Gemilang Berhad is considering which of two mutually exclusive projects it should undertake as its investment in the month of February 2019. The finance director thinks that the project with the higher Net Present Value (NPV) should be chosen whereas the managing director thinks that the one with the shorter payback period should be taken. As a management accountant, you are given with the followings projected profit: Project Initial cost AA (RM) (70,000) 15,000 ZZ (RM) (60,000) Year 1 20,000 Year 2 18,000 25,000 Year 3 20,000 32,000 18,000 Year 4 Year 5 Notes: All cash flows take place at the end of the year apart from the original investment in the project which takes place at the beginning of the project. 1. Project AA machinery is to be disposed of at the end of year 5 with a scrap value of RM10,000. 2. 3. Project ZZ machinery is to be disposed at the end of year 3 with a nil scrap value. 4. Gemilang Berhad's policy is to depreciate its assets on a straight line basis. 5. The…
The Whenworth Corporation is trying to choose between the following two mutually exclusive design projects: Year Cash Flow (I) Cash Flow (II) -$84,000 33,900 44,000 50,000 -$42,000 12,600 31,500 25,500 1 a-1. If the required return is 17 percent, what is the profitability index for each project? (Do not round intermediate calculations and round your answers to 3 decimal places, e.g., 32.161.) a-2. If the company applies the profitability index decision rule, which project should it take? b-1. If the required return is 17 percent, what is the NPV for each project? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) b-2. If the company applies the net present value decision rule, which project should it take? a-1. Project I Project II а-2. b-1. Project I Project II
The Michner Corporation is trying to choose between the following two mutually exclusive design projects: Year Cash Flow (I) 0 -$ 82,000 1 37,600 2 37,600 37,600 Cash Flow (II) -$ 21,700 11, 200 11,200 11, 200 a-1. If the required return is 10 percent, 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. a-2. If the required return is 10 percent and the company applies the profitability index decision rule, which project should the firm accept? b-1. If the required return is 10 percent, 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. b-2. If the company applies the NPV decision rule, which project should it take? a-1. Project I Project II a-2. Project acceptance b-1. Project I Project II b-2. Project acceptance
The Weiland Computer Corporation is trying to choose between the following mutually exclusive design projects, P1 and P2:Year 0123 Cash flows (P1) -$53,000 27,000 27,000 27,000 Cash flow (P2) -$16,000 9,100 9,100 9,100a. If the discount rate is 10 percent and the company applies the profitability index (PI) decision rule, which project should the firm accept?b. If the firm applies the Net Present Value (NPV) decision rule, which project should it take?c. Are your answers in (a) and (b) different? Explain why?
Zenith Investment Company is considering the purchase of an office property. It has done an extensive market analysis and has estimated that based on current market supply or demand relationships, rents, and its estimate of operating expenses, annual NOI will be as follows: Year NOI 1 $ 1,030,000 2 1,030,000 3 1,030,000 4 1,210,000 5 1,260,000 6 1,310,000 7 1,349,000 8 1,389,170 A market that is currently oversupplied is expected to result in cash flows remaining flat for the next three years at $1,030,000. During years 4, 5, and 6, market rents are expected to be higher. It is further expected that beginning in year 7 and every year thereafter, NOI will tend to reflect a stable, balanced market and should grow at 3 percent per year indefinitely. Zenith believes that investors should earn a 12 percent return (r) on an investment of this kind.Required: a. Assuming that the investment is expected to produce NOI in years 1 to 8 and is expected to be owned for…
Following is information on two alternative investments being considered by Jolee Company. The company requires a 10% return from its investments. For each alternative project, compute the (a) net present value and (b) profitability index. (Round your answers in part b to two decimal places.) If the company can only select one project, which should it choose?
The Michner Corporation is trying to choose between the following two mutually exclusive design projects: Year Cash Flow (I) Cash Flow (II) 0 -$ 76,000 -$ 34,000 1 29,000 11,000 23,500 17,500 2 3 36,000 42,000 a-1. If the required return is 12 percent, 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. a-2. If the company applies the profitability index decision rule, which project should it take? b-1. If the required return is 12 percent, 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. b-2. If the company applies the net present value decision rule, which project should it take? a-1. Project I a-2. Project II b-1. Project I b-2. Project II
1. Calculating Payback Period and NPV Greystone, Inc., has the following mutually exclusive projects. Year Project A Project B -$30,600 $21,400 10,600 15,400 15,600 6,200 8,600 3. 9,600 a. Suppose the company's payback period cutoff is two years. Which of these two projects should be chosen? b. Suppose the company uses the NPV rule to rank these.two projects. Which project should be chosen if the appropriate discount rate is 15 percent?

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