Prob. 4 Consider the following two projects. Which project would you select on the basis of rate of return, assuming MARR = 15% A2 A1 -9000 -12000 1 900 6000 3500 3400 5500 2300 3200 2800 1200 1600 Select Project = Reason: 23
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- You are considering the following two mutually exclusive projects. The required rate of return is 11.25% for project A and 10.75% for project B. Which project should you accept? YEAR PROJECT A PROJECT B 0 -$48,000 -$126,900 1 $18,400 $69.700 2 $31,300 $80,900 3 $11,700 $0EVALUATION o Given the following mutually-exclusive alternatives and a Minimum Attractive Rate of Return (MARR) of 7%, which should be chosen? o Solve as PV, FV and AW (3 separate analyses for each Design) and show which Design gets chosen in each. SHOW YOUR WORK (including cash flow diagram) with tool formulas, not tables at this time to ensure you're understanding the concepts. Year 0 1 23 4 5 Total Design A ($2500) $0 $0 $0 $0 $3100 $600 Design B ($2700) $650 $650 $650 $650 $700 $600 Design C ($3000) $250 $500 $750 $1000 $1250 $750Q which project will be the best using (EAW). S Using the Benefit-Cost Ratio Method, Find what is the best alternative from the projects listed below if u know that (-10%) for both project. Details Initial investment (CU) Annual revenue (CU/year) Annual expense (CU/year) Project life (year) Investment due to replacement of some machines every 3 years. Salvage value (CU) Purchasing a new machine in the seventh year. 0 -113 000 Alternative 1 300 000 50 000 15 500 1 30 000 5 13 500 Q5:A person is planning a new business, the initial investment and cash flow pattern for a new business are shown below: Non Non 2 Year Cash flow (CU) The expected life of the project is five year.Find the rate of return for a new business. 30 000 3 30 000 Alternative 2 200 000 75 000 29 000 10 Non 4 30 000 22 000 13 000 5 30 000
- You are considering the following two projects which are mutually exclusive. The required return on each project is 14%. Which project should you accept and what is the best reason for that decision? Year Project A Project B 0 $-46,000 $-46,000 1 $25,000 $11,000 2 $18,000 $19,000 3 $16,000 $32,000 a) Both Project A and B since they both have positive NPV b) Project A, because it has the higher profitability index c) Project A, because it has the higher net present value d) Project B, because it has the higher net present valueCompute the IRR, NPV, Pi, and payback period for the following two projects. Assume the required return is 10%. Year Project A Project B 0 $-200 $-150 1 $200 $50 2 $800 $100 3 $-800 $150 Please show inputs from the BAII Plus Financial calculator of how to get these answersa. Cobre Company is considering the purchase of new equipment that will speed up the process for extracting copper. The equipment will cost $3,800,000 and have a life of 5 years with no expected salvage value. The expected cash flows associated with the project are as follows: Year Cash Revenues Cash Expenses $6,000,000 $4,800,000 6,000,000 4,800,000 3 6,000,000 4,800,000 4 6,000,000 4,800,000 6,000,000 4,800,000 b. Emily Hansen is considering investing in one of the following two projects. Either project will require an investment o $75,000. The expected cash revenues minus cash expenses for the two projects follow. Assume each project is depreciable. Year Project A Project B 1. $2,500 $22,500 2 30,000 30,000 45,000 45,000 4 75,000 22,500 75,000 22,500 c. Suppose that a project has an ARR of 30% (based on initial investment) and that the average net income of the project is $220,000. d. Suppose that a project has an ARR of 50% and that the investment is $250,000. 3.
- Q.2. For an investor with a minimum rate of return of 8.0%: a) Rank the following non-mutually exclusive alternative. b) For a time zero budget of $1,400, which of the projects would you select? Use NPV, GRR and PI analysis. Year 0 1 2 3 4 Project A -$200 $75 $75 $75 $75 Project B -$450 $155 $155 $155 $155 Project C -$700 $250 $250 $250 $250 Project D -$950 $380 $330 $280 $230Iggy Company is considering three capital expenditure projects. Relevant data for the projects are as follows. Annual Life of Project Investment Income Project 22A $242,800 $16,840 6 years 23A 275,000 20,680 9 years 24A 282,000 15,700 7 years Annual income is constant over the life of the project. Each project is expected to have zero salvage value at the end of the project. Iggy Company uses the straight-line method of depreciation. Click here to view PV table. (a)Value/other investment criteria (i Saved Help Save Consider the following two projects: Cash flows Project A Project B -$270 CO -$270 С1 115 143 C2 115 143 Сз 115 143 C4 115 a. If the opportunity cost of capital is 10%, which of these two projects would you accept (A, B, or both)? b. Suppose that you can choose only one of these two projects. Which would you choose? The discount rate is still 10%. Which one would you choose if the cost of capital is 15%? d. What is the payback period of each project? e. Is the project with the shortest payback period also the one with the highest NPV? f. What are the internal rates of return on the two projects? g. Does the IRR rule in this case give the same answer as NPV? h-1. If the opportunity cost of capital is 10%, what is the profitability index for each project? h-2. Is the project with the highest profitability index also the one with the highest NPV? h-3. Which measure should you use to choose between the projects? Complete this question by…
- Consider the following two mutually exclusive investment projects:Project Cash Flowsn A B 0 -$4,000 -$8,5001 $400 $11,5002 $7,000 $400Assume that the MARR = 15%.(a) Using the NPW criterion, which project would you select?(b) On the same chart, sketch the PW(i) function for each alternative fori = 0% and 50%. For what range of i would you prefer Project B?A project requires an investment of $2,500 and has a net present value of $430. If the internal rate of return is 10%, what is the profitability index for the project? Multiple Choice 0.70 0.25 1.17 2.33A. Calculate the profitability index for project X. B. Calculate the profitability for project Y C. Using the NPV method combined with the PI aporoach, which project would you select? Use a discount rate of 13 percent