Project Alternatives n Project A1 Cash Flows Project A2 Cash Flows 0-$14,000 1+ $4,000 2+ $4,000 3+$12,000 $17,000 + $21,000 A If MARR=15% and assuming indefinite required service and repeatability, use the incremental NPV and IRR analyses in parts (a) and (b) of the problem, respectively, to choose the project in part (c). Please note that project alternatives A1 and A2 have different lives, namely three years for A1 and one year for A2. The alternatives should be compared over the same period, so project A2 will have to be repeated twice."

Project Alternatives n Project A1 Cash Flows Project A2 Cash Flows 0-$14,000 1+ $4,000 2+ $4,000 3+$12,000 $17,000 + $21,000 A If MARR=15% and assuming indefinite required service and repeatability, use the incremental NPV and IRR analyses in parts (a) and (b) of the problem, respectively, to choose the project in part (c). Please note that project alternatives A1 and A2 have different lives, namely three years for A1 and one year for A2. The alternatives should be compared over the same period, so project A2 will have to be repeated twice."

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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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?
"Consider the following two mutually-exclusive alternatives: Project Alternatives n Project A1 Cash Flows Project A2 Cash Flows $14,000 -$17,000 +$21,000 1 + $4,000 2+ $4,000 +$12,000 If MARR=15% and assuming indefinite required service and repeatability, use the incremental NPV and IRR analyses in parts (a) and (b) of the problem, respectively, to choose the project in part (c). Please note that project alternatives A1 and A2 have different lives, namely three years for A1 and one year for A2. The alternatives should be compared over the same period, so project A2 will have to be repeated twice." (a) The Net Present Value of the incremental investment is: (b) The Internal Rate of Return of the incremental investment is: (c) We should choose project alternative: + Note: Please enter your answers to two decimal places. If using the interest factor method, apply the value of the factor as presented in the table or spreadsheet (with all four decimal places).
Compute the Profitability Index (PI) for each project? Project A Project B Profitability Index (PI) 5- In light of your answers above, suppose that these two projects might be mutually exclusive or independent. According to these two assumptions, fill in the blanks in the table below with the suitable answer: Points Investment Criteria If A and B are mutually exclusive, then I would select If A and B are independent, then I would select PBP NPV IRR PI
What is the expected NPV of the following decision tree? The net flow and associated probability is shown above and below each branch for the two-year project. a. -R18.72m b. -R5.56m c. R5.00m d. R16.12m
11. IRR rule (S5.3) Consider the following two mutually exclusive projects: Cash flows ($) Project A B Co -50 -50 C₁ +60 0 C₂ +60 0 0 +140 Page 142 a. Calculate the NPV of each project for discount rates of 0%, 10%, and 20%. Plot these on a graph with NPV on the vertical axis and discount rate on the horizontal axis. b. What is the approximate IRR for each project? c. In what circumstances should the company accept project A? d. Calculate the NPV of the incremental investment (B – A) for discount rates of 0%, 10%, and 20%. Plot these on your graph. Show that the circumstances in which you would accept A are also those in which the IRR on the incremental investment is less than the opportunity cost of capital.
Consider two mutually exclusive projects, A and B, whose costs and cash flows areshown in the following table:Year Project A Project B1 $(14,000) $(22,840)2 8,000 8,0003 6,000 8,0004 2,000 8,0005 3,000 8,000Calculate the cross over rate. Please use equations and not excel
Hello, Please assist w NPV and payback method calculations for following data: Project B completion time probability should be 0.2 for 24mo instead of 0.10 Thanks
5a. EQ: Internal rate of return = the rate that equates inflows with outflows 5b. Rule: Accept the project if the IRR > the required return. 5c. EX: Reevaluate the project in "1c" using the IRR method and a 10% required return: IRR 9.70% REJECT 5d. Problem: Reevaluate the project in "3c" using the IRR method and an 11% required return. 6a. EQ: Modified IRR = [(FV of inflows) / Cost]/n - 1 6b. Rule: Accept the project if the MIRR > the required return. 6c. EX: Reevaluate the project in "1c" using the MIRR method, a 3% re-interest rate and a 10% required MIRR= [($10,000 x 3.0909) / $25,000] 1/3-1 = 0.0733 or 7.33% REJECT rate. 6d. Problem: Evaluate a project costing $100,000 and returning $25,000 annually for five years using the MIRR method, a 4% re-interest rate and a 9% required return. 7a. EQ: Profitability index = PV of the inflows / Cost 7b. Rule: Accept the project if the PI > 1. 7c. EX: Evaluate a project costing $25,000 and returning $10,000 annually for years 1-3 using the PI…
PRINTED NAME _____________________________________________ Project X Project Y PB (payback) DPB (Discounted Payback) NPV $ PI IRR% MIRR% EAA (NUS) $ CROSSOVER RATE % NPV $ (using crossover rate) If the projects are INDEPENDENT, which would you choose? WHY? _____________________________________________________________ If the projects are MUTUALLY EXCLUSIVE, which would you choose? WHY? _____________________________________________________________ When you would be INDIFFERENT between the projects? WHY? _____________________________________________________________ SIGNATURE _____________________________________________________
3e.a.Determinethe payback period for each b.Calculatethe net present value (NPV) for each c.Calculatethe profitability index (PI) for each project. d.Calculatethe internal rate of return (IRR) for each e.Basedon ALL your answers above, explain briefly which project should be Note: i just need (e) no question answer not all no need excle formula , thank you
Consider the two mutually exclusive projects described in the table below. the question requires a step by step excel solutionFor any positive value of the MARR, divide the possible MARR values into ranges with different decisions;describe and discuss what decision would be made in each range and why. You will need to calculate the crossover rate to determine the precise MARR where the decision changes. Include an NPV profile table and chart to illustrate your answer.Year Cash Flow Project A Cash Flow Project B0 -450,000 -700,0001 200,000 200,0002 150,000 200,0003 100,000 200,0004 100,000 200,0005 75,000 200,000
Iggy 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)

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