Basic scenario analysis Prime Paints is in the process of evaluating two mutually exclusive additions to its processing capacity. The firm's financial analysts have developed pessimistic, most likely, andoptimistic estimates of the annual cash inflows associated with each project. These estimates are shown in the following table.Initial investment (CF)OutcomePessimisticMost likelyOptimisticProject A$12,100Annual cash inflows (CF)$8301,6702,400Project B$12,100a. The range of annual cash inflows for project A is $$1,5301,6701,730a. Determine the range of annual cash inflows for each of the two projects.b. Assume that the firm's cost of capital is 9.5% and that both projects have 17-year lives. Construct a table showing the NPVs for each project for each of the possible outcomes. Include the range of NPVs foreach project.(Round to the nearest dollar.)...

optimistic estimates of the annual cash inflows associated with each project. These estimates are shown in the following table. Project A $12,100 Project B $12,100 Initial investment (CF) Outcome Pessimistic Most likely Optimistic Annual cash inflows (CF) $830 1,670 2,400 $1,530 1,670 1,730 . Determine the range of annual cash inflows for each of the two projects. . Assume that the firm's cost of capital is 9.5% and that both projects have 17-year lives. Construct a table showing the NPVS for each project for each of the possible outo each project. . The range of annual cash inflows for project A is S (Round to the nearest dollar) CHI

optimistic estimates of the annual cash inflows associated with each project. These estimates are shown in the following table. Project A $12,100 Project B $12,100 Initial investment (CF) Outcome Pessimistic Most likely Optimistic Annual cash inflows (CF) $830 1,670 2,400 $1,530 1,670 1,730 . Determine the range of annual cash inflows for each of the two projects. . Assume that the firm's cost of capital is 9.5% and that both projects have 17-year lives. Construct a table showing the NPVS for each project for each of the possible outo each project. . The range of annual cash inflows for project A is S (Round to the nearest dollar) CHI

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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A firm evaluates all of its projects by applying the IRR rule. Year Cash Flow 0 -$ 152,000 1 64,000 2 75,000 3 59,000 a. What is the project's IRR? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. b. If the required return is 13 percent, should the firm accept the project? % a. Internal rate of return b. Project acceptance
Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 −$29,000 −$29000 1 14,400 4,300 2 12,300 9,800 3 9,200 15,200 4 5,100 16,800 a) What is the Internal Rate of Return (IRR) for each of these projects? b) Using the IRR decision rule, which project should the company accept? c) If the required return is 11 percent, what is the Net Present Value (NV) for each of these projects? d) Using the NPV decision rule, which project should the company accept? e) Why do you think the NPV and IRR rules do not agree on same project approval/rejection direction?
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I need help finding the Profitability index for each project (D) using Excel
Prime Paints is in the process of evaluating two mutually exclusive additions to its processing capacity. The firm's financial analysts have developed pessimistic, most likely, and optimistic estimates of the annual cash inflows associated with each project. These estimates are shown in the following table. Project A Project B Initial investment (CF0) $12,900 $12,900 Outcome Annual cash inflows (CF ) Pessimistic $830 $1,540 Most likely 1,690 1,690 Optimistic 2,490 1,790 a. Determine the range of annual cash inflows for each of the two projects. b. Assume that the firm's cost of capital is 9.1%and that both projects have 18-year lives. Construct a table showing the NPVs for each project for each of the possible outcomes. Include the range of NPVs for each project. c. Do parts (a) and (b) provide consistent views of the two projects? Explain.
Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) -$425,000 44,000 62,000 79,000 540,000 -$40,000 20,400 13,300 18,600 15,400 2 4 The required return on these investments is 10 percent. a. What is the payback period for each project? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) b. What is the NPV for each project? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) c. What is the IRR for each project? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) d. 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.) e. Based on your answers in (a) through (d), which project will you finally choose? a. Project A Project B b. Project A Project B c. Project A years years % Project B % d. Project A…
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Solve Part B of the question
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