If the cost of capital (discount rate) is 10%, which project(s) do you invest in and why? OA. Project B- it will pay back the quickest B. Project C- it generates the greatest cash flow C. Project A- it has the highest accounting rate of return D.Project B-it has the highest net present value E. Project A- it has the highest net present value F. Project C-it has the highest profitability index
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- Porter Company is analyzing two potential investments Initial investment Net cash flow: Year 1 Year 2 Year 3 Year 4 Project X Project Y $ 75,900 $ 64,000 26,000 26,000 26,000 4,400 28,000 28,000 20,000 If the company is using the payback period method, and it requires a payback of three years or less, which project(s) should be selected? 0• You, a project manager, are in the middle of choosing between two different projects with the following cash flows: Time period 0 1 2 3 4 Project A $(60,000) $5,000 $10,000 $10,000 $75,000 Project B $(60,000) $50,000 $30,000 $10,000 $10,000 • Determine which project you should act on using NPV with an interest rate of 12%.QUESTIONS THREEYou are a financial Analyst for Bandari Limited. The director of capital budgeting has asked you to analyze two proposed capital investments , project a X and Y. Each project has a cost of $ 10,000 and the cost of capital for each each project is 12%. The projects expected net cash flow are as followsYEAR PROJECT X PRJECT Y0 (10,000) (10,000)1 6,500 3,5002 3,000 3,5003 3,000 3,5004 1,000 3,500For each Project, estimate;(a) Regular pay back period(b) NPV(c) MIRR(d) IRR(e) Cross over rate(f) NPV for each project using the Cross over rate estimated in part (e)(g) Assumed re-investment rate based on (i) IRR assumption(ii) NPV assumption
- Practical Question The total investment required for two projects are estimated at OMR100, 000. The cash flows expected from the two projects for the first four years are explained in the table below. Year Project A Project B Year 1 15,000 15,000 Year 2 28,500 40,000 Year 3 40,000 21,500 Year 4 50,000 35,000 Use the above information and advise which project to select based on payback period method 11 直 hpQuestion: You are a financial analyst for the Hitler Company. The director of capital budgeting has asked you to analyze two proposed capital investments, Projects X and Y. Each project has a cost of $10,000, and the cost of capital for each project is 12 percent. The projects’ expected net cash flows are as follows: Expected Net Cash Flows Year Project X Project Y 0 ($10,000) ($10,000) 1 6,500 3,500 2 3,000 3,500 3 3,000 3,500 4 1,000 3,500 Required: Calculate each project’s payback period, discounted payback period, net present value (NPV), profitability index and internal rate of return (IRR). Which project or projects should be accepted if they are independent? Which project should be accepted if they are mutually exclusive?The following table contains information about four potential investment projects that Castle Corporation is considering. Required Investment $640,000 Payback Project A Project Life ARR Period 5 19.50% 3.9 B $ 890,000 4 17.75% 3.5 с $ 1,140,000 4 10.75% 3.2 NPV $203,250 $193,062 $ 216,670 Profitability Index 2.88 1.22 1.35 D $ 1,640,000 5 12.45% 3.8 $ 246,008 1.30 Required: 1. Rank the four projects in order of preference under each method indicated by the headers: 2. Which method is the best for evaluating the investments? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Rank the four projects in order of preference under each method indicated by the headers: 1st preferred 2nd preferred 3rd preferred 4th preferred Accounting Rate of Return Payback Period Net Present Value Profitability Index
- Consider the following list of projects: Project Investment NPV A $135,000 $13,500 200,000 30,000 C 150,000 25,000 D 175,000 20,000 Assuming that your capital is constrained, which project should you invest in last? O Project A O Project B O Project C O Project DQuestion Five: for an investment project which is shown its payment details in Figure (2), it is desired to evaluate the project economically to decide accept the project or no. Choose the correct answer for the following: Figure (2) A=$8000 HIGHF 3 A=$5000 i=20% $20,000 $10,000You are analyzing two proposed capital investments with the following cash flows: Year Project X Project Y - $20,000 - $20,000 12,630 7,470 5,660 7,470 3 6,360 7,470 4 1,920 7,470 1, 2.
- Porter Company is analyzing two potential Investments. Project X $ 75,900 Initial investment Net cash flow: Year 1 Year 2 Year 3 Year 4 Multiple Choice O If the company is using the payback period method, and it requires a payback of three years or ess, which project(s) should be selected? Project Y. 26,000 26,000 26,000 0 Project X. Project Y $ 64,000 Both X and Y are acceptable projects. 4,400 28,000 28,000 20,000 Neither X nor Y is an acceptable project. Project Y because it has a lower Initial Investment.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 conclusionsQuestion 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