Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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- Project X Initial investment (CF) $500,000 Year (1) 1 2 3 4 5 Project Y $330,000 Cash inflows (CFt) $130,000 $120,000 $130,000 $200,000 $240,000 $150,000 $130,000 $75,000 $80,000 $60,000arrow_forwardRobinson Robotics is considering two mutually exclusive projects, Project A and Project B. The projects have the following cash flows: Year Project A Cash Flow Project B Cash Flow 0 -$200 -$300 1 20 90 2 30 70 3 40 60 4 50 50 5 60 40 At what cost of capital would the two projects have the same net present value (NPV)? 12.69% 9.32% 10.32% 8.14% None of the abovearrow_forward5.1.3 Calculate the Net Present Value of each project (with amounts rounded off to the nearest Rand). INFORMATION Zeda Enterprises has the option to invest in machinery in projects A and B but finance is only available to invest in one of them. You are given the following projected data: Initial cost Scrap value Depreciation per year Net profit Year 1 Year 2 Year 3 Year 4 Year 5 Net cash flows Year 1 Year 2 Year 3 Year 4 Year 5 Project A R300 000 R40 000 R52 000 R20 000 R30 000 R50 000 R60 000 R10 000 Project B R300 000 0 R60 000 R90 000 R90 000 R90 000 R90 000 R90 000arrow_forward
- XYZ Corporation: The data shown in the above table are for two mutually exclusive security projects that a company, called XYZ, is considering. Both projects are assumed to be strategically important to the company. Assume further the company’s cost of capital is 10%. year project A Project B 0 -200 -150 1 200 50 2 800 100 3 -800 150 Calculate the NPV of both projects. Calculate the Profitability Index for both projects. Calculate the IRR for both projects Which security project should XYZ invest in?arrow_forwardNet present value method, internal rate of return method, and analysis for a service company The management of Advanced Alternative Power Inc. is considering two capital investment projects. The estimated net cash flows from each project are as follows: Year Wind Turbines Biofuel Equipment 1 $230,000 $410,000 2 230,000 410,000 3 230,000 410,000 4 230,000 410,000 The wind turbines require an investment of $698,510, while the biofuel equipment requires an investment of $1,170,550. No residual value is expected from either project. Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 1.833 1.736 1.690 1.626 1.528 3 2.673 2.487 2.402 2.283 2.106 4 3.465 3.170 3.037 2.855 2.589 5 4.212 3.791 3.605 3.353 2.991 6 4.917 4.355 4.111 3.785 3.326 7 5.582 4.868 4.564 4.160 3.605 8 6.210 5.335 4.968 4.487 3.837 9 6.802 5.759 5.328 4.772 4.031 10 7.360 6.145 5.650 5.019 4.192 Required: 1a. Compute the net present value for each project. Use a rate of…arrow_forwardPut answer in table format Yokam Company is considering two alternative projects. Project 1 requires an initial investment of $560,000 and has a present value of cash flows of $2,200,000.0. Project 2 requires an initial investment of $5,000,000 and has a present value of cash flows of $7,000,000. 1. Compute the profitability index for each project.2. Based on the profitability index, which project should the company prefer?arrow_forward
- IRR: Mutually exclusive projects Nile Inc. wants to choose the better of two mutually exclusive projects that expand warehouse capacity. The projects' cash flows are shown in the following table: . The cost of capital is 18%. a. The internal rate of return (IRR) of project X is %. (Round to two decimal places.) Data table Is project X acceptable on the basis of IRR? (Select the best answer below.) (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) Yes O No Project X $500,000 Project Y $310,000 The internal rate of return (IRR) of project Y is %. (Round to two decimal places.) Initial investment (CF) Is project Y acceptable on the basis of IRR? (Select the best answer below.) Year (t) Cash inflows (CF,) $120,000 $140,000 $105,000 $60,000 1 $100,000 O Yes $160,000 O No $170,000 $190,000 b. Which project is preferred? (Select the best answer below.) $250,000 $30,000 OA. Project X N 34 5arrow_forwardhowell petroleum, incorporatred, is trying to evaluate a generation project with the following cash flows: year 0 -39,300,000 year 1 63,300,000 year 2 -12,300,000 What is the NPV for the project if hte company requires a return of 12 percent? this project has two irr what are theyarrow_forwardQuestion and chart incuded in screenshotarrow_forward
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