NPV and IRR AnalysisCummings Products Company is considering two mutually exclusive investments whose expected net cash flows are as follows:EXPECTED NET CASH FLOWSYearProject AProject B-$340-$630-528210-2192103-1502101,100210820210990210-325210a. Construct NPV profiles for Projects A and B.Select the correct graph.ABVPVS)1400VPV(S)VPV(S)14001400-12001200-1200-100010001000800Project B800-Project A800Project A600600-600400400-Project AProject B400200200Project B200Cost of capiar5 20-530-55+++102025 30-515Cost of cntal%-200Cost of capital %)202530-200-200-400-4001-400IDVPVS) T GAGE MINDTAPDVPVS) I1400-12001000+800-Project A600-400-Project B200Costof capiar52030-200-400The correct graph is-Select-b. What is each project's IRR? Do not round intermediate calculations. Round your answers to two decimal places.Project A:%Project B:c. Calculate the two projects' NPVS, if each project's cost of capital was 11%. Do not round intermediate calculations. Round your answers to the nearest cent.Project A: $Project B: $Which project, if either, should be selected?-Select-v should be selected.Calculate the two projects' NPVS, if each project's cost of capital was 18%. Do not round intermediate calculations. Round your answers to the nearest cent.Project A: $Project B: $What would be the proper choice?-Select-v is the proper choice.d. What is each project's MIRR at a cost of capital of 11%? (Hint: Consider Period 7 as the end of Project B's life.) Do not round intermediate calculations. Round ydecimal places

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NPV and IRR Analysis Cummings Products Company is considering two mutually exclusive investments whose expected net cash flows are as follows: EXPECTED NET CASH FLOWS Year Project A Project B -$340 -$630 1 -528 210 -219 210 -150 210 1,100 210 820 210 990 210 -325 210 Construct NPV profiles for Projects A and B. Select the correct graph. VPVS) 1400 VPV5) 1400 VPV(S) 1400 1200 1200 1200 1000 1000- 1000 800 Project B 800 Project A 800 Project A 600 600 600 400 400- Project A Project B 400 200 200 200 Project B -5 Costof capitar 5 20 25 30 -5 Cost of ca tof capans 20 25 30 15 25 30 -200t -4001 Corofeital 20 -200 -200 -4001 -400I D

NPV and IRR Analysis Cummings Products Company is considering two mutually exclusive investments whose expected net cash flows are as follows: EXPECTED NET CASH FLOWS Year Project A Project B -$340 -$630 1 -528 210 -219 210 -150 210 1,100 210 820 210 990 210 -325 210 Construct NPV profiles for Projects A and B. Select the correct graph. VPVS) 1400 VPV5) 1400 VPV(S) 1400 1200 1200 1200 1000 1000- 1000 800 Project B 800 Project A 800 Project A 600 600 600 400 400- Project A Project B 400 200 200 200 Project B -5 Costof capitar 5 20 25 30 -5 Cost of ca tof capans 20 25 30 15 25 30 -200t -4001 Corofeital 20 -200 -200 -4001 -400I D

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter12: Capital Budgeting: Decision Criteria

Section: Chapter Questions

Problem 13P

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Cummings Products Company is considering two mutually exclusive investments whose expected net cash flows are as follows: Expected Net Cash Flows Year Project A Project B 0 -$340 -$630 1 -528 210 2 -219 210 3 -150 210 4 1,100 210 5 820 210 6 990 210 7 -325 210 Select the correct graph for NPV profiles for Projects A and B. The correct graph is . What is each project's IRR? Do not round intermediate calculations. Round your answers to two decimal places. Project A: % Project B: % Calculate the two projects' NPVs, if each project's cost of capital was 11%. Do not round intermediate calculations. Round your answers to the nearest cent. Project A: $ Project B: $ Which project, if either, should be selected? should be selected. Calculate the two projects' NPVs, if each project's cost of capital was 18%. Do not round intermediate calculations. Round your answers to the nearest cent. Project A: $ Project B:…
NPV and IRR Analysis Cummings Products Company is considering two mutually exclusive investments whose expected net cash flows are as follows: EXPECTED NET CASH FLOWS Year Project A Project B 0 -$290 -$400 1 -387 134 2 -193 134 3 -100 134 4 600 134 5 600 134 6 850 134 7 -180 134 Construct NPV profiles for Projects A and B. Select the correct graph. (see image) 2. What is each project's IRR? Do not round intermediate calculations. Round your answers to two decimal places. Project A % Project B % 3. Calculate the two projects' NPVs, if you were told that each project's cost of capital was 14%. Do not round intermediate calculations. Round your answers to the nearest cent.Project A $ Project B $ Which project, if either, should be selected? Calculate the two projects' NPVs, if the cost of capital was 17%. Do not round intermediate calculations. Round your answers to the nearest cent.Project A $ Project B $ Which project would be the proper…
NPV and IRR Analysis Cummings Products Company is considering two mutually exclusive investments whose expected net cash flows are as follows: EXPECTED NET CASH FLOWS Year Project A Project B -$430 -$680 1 -528 210 2 -219 210 3 -150 210 4 1,100 210 820 210 6 990 210 7 -325 210 a. Construct NPV profiles for Projects A and B. Select the correct graph. A B D VPVS) 1400- VPVS) I 1400- VPS) 1400- VPVS) 1400- 1200- 1200A 1200- 1200 1000 1000 1000 1000 800- 800 800 800 Project A Project B Project A Project A 600 600 600 600 400 400 400 400 200- Project B Project A Project B - 200 200 200- Project B +.... Cost of cabar so Costof cabiar5 -5 Cost of capita 10 20 25 -5 10 20 25 -5 10 va15 20 25 30 -5 Cost of catal 20 25 30 -200 -200 -200 -200 -400 -400 -400 -4001 The correct graph is -Select- v
Consider the following two sets of project cash flows: Project Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Discount rate X -830 145 158 193 253 288 290 0.123 Y -510 193 193 91 81 88 90 0.123 A) Assume that projects X and Y are mutually exclusive. The correct investment decision and the best rational for that decision is to: i) invest in Project Y since IRRY > IRRX. ii) invest in Project Y since NPVY > NPVX. iii) neither of the above. B) What are the incremental IRR and NPV of Project X? C) Is the use of the incremental measures in B) appropriate to your evaluation of the preferred project? Explain. D) Which is the preferred project? Explain and justify the basis for your choice
Consider the following two sets of project cash flows:Project Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6DiscountRateX -903 175.6 169.8 201.4 251.5 299.2 305.2 0.1037Y -513 190.5 195.5 90.5 80.5 85.5 110.5 0.1037A) Assume that projects X and Y are mutually exclusive. The correct investment decision andthe best rational for that decision is to:i) invest in Project Y since IRRY > IRRX.ii) invest in Project Y since NPVY > NPVX.iii) neither of the above.B) What are the incremental IRR and NPV of Project X?C) Is the use of the incremental measures in B) appropriate to your evaluation of thepreferred project? Explain.D) Which is the preferred project? Explain and justify the basis for your choice.(6 marks)2) Due to the demands of the new ATO Single Tough Reporting System, a successful manufacturingcompany is assessing the introduction of a new computer system to improve regulatory reportingcompliance. The managing director wants to install a new Pay Perfect system, whereas the…
All techniques: Decision among mutually exclusive investments Pound Industries is attempting to select the best of three mutually exclusive projects. The initial investment and subsequent cash inflows associated with these projects are shown in the following table. Cash flows Initial investment (CF) Cash inflows (CF), t= 1 to 5 OA. Project A a. Calculate the payback period for each project. b. Calculate the net present value (NPV) of each project, assuming that the firm has a cost of capital equal to 11%. c. Calculate the internal rate of return (IRR) for each project. d. Indicate which project you would recommend. a. The payback period of project A is The payback period of project B is The payback period of project C is b. The NPV of project A is $ The NPV of project B is $ (Round to the nearest cent.) The NPV of project C is $. (Round to the nearest cent.) c. The IRR of project A is%. (Round to two decimal places.) The IRR of project B is %. (Round to two decimal places.) The IRR of…
Consider the following projects: Cash Flows ($) Project D E CO00 C101 -11,700 23,400 -21,700 37,975 Assume that the projects are mutually exclusive and that the opportunity cost of capital is 12%. a. Calculate the profitability index for each project. b-1. Calculate the profitability-index using the incremental cash flows. b-2. Which project should you choose?
A firm is considering the following independent projects. Project Investment Present value offuture cash flows NPV A $130 $176 $46 B $103 $115 $12 C $183 $287 $104 D $161 $199 $38 E $184 $273 $89 What is the Profitability Index of Project B? Question 5Answer a. 0.85 b. 1.12 c. 0.89 d. 1.18
Cummings Products Company is considering two mutually exclusive investments whose expected net cash flows are as follows: EXPECTED NET CASH FLOWS Year Project A Project B 0 -$300 -$405 1 -387 134 2 -193 134 3 -100 134 4 600 134 5 600 134 6 850 134 7 -180 134 Construct NPV profiles for Projects A and B. 1.What is each project's IRR? Do not round intermediate calculations. Round your answers to two decimal place Project A % Project B % Calculate the two projects' NPVs, if you were told that each project's cost of capital was 10%. Do not round intermediate calculations. Round your answers to the nearest cent.Project A $Project B $Which project, if either, should be selected?-Select-Project AProject BItem 6Calculate the two projects' NPVs, if the cost of capital was 17%. Do not round intermediate calculations. Round your answers to the nearest cent.Project A $Project B $What would be the proper choice?-Select-Project…
Consider cash flows for the following investment projects (MARR Q2. Suppose that projects are mutually exclusive. Which project would you select based on AE criterion? 15 %). Project A Project B -3500 ProjectC -3000 -4000 1 1400 1100 1500 2. 1650 1000 1500 1300 1000 1800 4 750 1000 1800
The cash flow streams for three alternative investment A, B, C and D are: Project Co Cash Flow (Tk.) C2 Cs C 55000 C3 C4 C6 A 230000 45000 65000 45000 75000 50000 B 290000 45000 90000 35000 95000 65000 55000 C 310000 75000 55000 60000 55000 65000 45000 D 350000 77000 75000 95000 85000 65000 Determine (i) Pay Back Period, (ii) NPV if the required rate of return is 11%, and (ii) IRR for the four alternatives.
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%?