Problem 8-23 Profitability Index (LO3) Consider the following projects: Project A Co -$ 3,000 B -3,000 C₁ +$ 2,900 +2,340 C2 +$ 2,100 +1,908 a. Calculate the profitability index for A and B assuming a 24% opportunity cost of capital. Note: Do not round intermediate calculations. Round your answers to 4 decimal places. Answer is complete but not entirely correct. Profitability index Project A 1.2348 X B 1.0427 X b. According to the profitability index rule, which project(s) should you accept? Project A Project B O Both ☑ Neither

Problem 8-23 Profitability Index (LO3) Consider the following projects: Project A Co -$ 3,000 B -3,000 C₁ +$ 2,900 +2,340 C2 +$ 2,100 +1,908 a. Calculate the profitability index for A and B assuming a 24% opportunity cost of capital. Note: Do not round intermediate calculations. Round your answers to 4 decimal places. Answer is complete but not entirely correct. Profitability index Project A 1.2348 X B 1.0427 X b. According to the profitability index rule, which project(s) should you accept? Project A Project B O Both ☑ Neither

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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Problem 8-6 Profitability Index (LO3) The following are the cash flows of two projects: Year Project A Project B $ (270) $ (270) 1 150 170 2 150 170 3 150 170 4 150 If the opportunity cost of capital is 12%, what is the profitability Index for each project? Note: Do not round Intermediate calculations. Round your answers to 4 decimal places. Project A B Profitability Index
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Question 1: Salalalh Methanol company management is considering three competing investment Projects A, B & C Year Initial Investment 1 2 Project A Project B 12000 4150 Project C 12000 12000 5225 8250 1200 3100 3800 4600 Assume a discount Rate of 5.45 % 5260 7360 9460 9275 9300 4 Use the information above and help the management in choosing the most desirable Project using Payback period, Discounted payback Net Present value and Profitability Index. Out of the four methods which is considered to be the most desirable. Explain
Compute the NPV for Project M if the appropriate cost of capital is 7 percent. (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your final answer to 2 decimal places.) Project M Time: Cash flow: 2 4 -$1,100 $370 $500 $540 $620 $120 NPV Should the project be accepted or rejected? O accepted O rejected MacBook Alr
Based on the information below which projects will we choose based on weighted average profitabiltity Index if we only have OMR500,000 to invest? Project NPV Investment PI A 130,000 200,000 B 241,250 225,000 C 294,250 275,000 D 262,000 250,000 Select one: a. WAPI AD b. WAPI AB c. WAPI BD d. WAPI BC
Consider the following two projects: Cash flows Project A Project B C0�0 −$ 240 −$ 240 C1�1 100 123 C2�2 100 123 C3�3 100 123 C4�4 100 a. If the opportunity cost of capital is 8%, 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 8%. c. Which one would you choose if the cost of capital is 16%? 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. If the opportunity cost of capital is 8%, what is the profitability index for each project? i. Is the project with the highest profitability index also the one with the highest NPV? j. Which measure should you use to choose between the projects?
8. NPV profiles An NPV profile plots a project's NPV at various costs of capital. An example NPV profile is shown below: Identify the range of costs of capital that a firm would use to accept and reject this project, and answer the questions that follow. NPV (Dollars) 600 500 400 300 200 100 0 ← -100 -200 -300 A 2 4 6 8 10 12 14 16 DISCOUNT (REQUIRED) RATE (Percent) The project represented by triangle A should be B 18 20 This NPV profile demonstrates that as the cost of capital increases, the project's NPV ?
Spreadsheet Link What is the IRR of the following project?Cash FlowYear0 -32,0001. 9,0002. 10,0003. 15,0004. 7,800 1). 10.8% 2). 11.2% 3). 11.7%4). 12.0% 5). 12.3%
The Company has three potential projects from which to choose. Selected information on each of the three projects follows: Project A Project B Project C Investment required $44,400 $55,700 $53,100 Net present value of project $49,100 $74,100 $69,100 Using the profitability index, rank the projects from most profitable to least profitable. A, B, C B, A, C B, C, A C, B, A
Consider the following information: Cash Flows ($) Project C0 C1 C2 C3 C4 A –5,300 1,300 1,300 2,700 0 B –700 0 600 2,300 3,300 C –5,200 3,400 1,700 800 300 a. What is the payback period on each of the above projects? (Round your answers to 2 decimal places.)
answer problem with all necessary computation A, B and C
QUESTION 3 If the cash flows for Project M are CO= -2,000; C1 = +400; C2 = +1,400; and C3= +1,300, calculate the IRR for the project. Please input the percentage format for your answer. And there is no need to put the percentage sign (%).

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