Q# 5. [10 pts] Calculating Net Present Values and Making the Financial Decisions General Electric (GE) has the opportunity to invest in 2 projects. Project A requires an investment of $1M which will give a return of $300,000 each year for 5 years. Project B requires an investment of $750,000 which will give a return of $100,000, $150,000, $200,000, $250,000 and $ 250,000 for the next 5 years. Then Calculate the Net Present Value (NPV) which can be used to decide which opportunity is better and should be invested in. For Project A 6 For Project A 7 8 Discount Rate 9 Initial Investment 10 11 12 13 14 15 16 17 Year 1 2 3 4 5 B 10% $1,000,000 Cash Flows $300,000 $300,000 $300,000 $300,000 $300,000 For Project B 23 For Project B 24 25 Discount Rate 26 Initial Investment 27 28 29 30 31 32 33 34 Year 1 2 3 4 5 B 10% $750,000 Cash Flows $100,000 $150,000 $200,000 $250,000 $250,000

Q# 5. [10 pts] Calculating Net Present Values and Making the Financial Decisions General Electric (GE) has the opportunity to invest in 2 projects. Project A requires an investment of $1M which will give a return of $300,000 each year for 5 years. Project B requires an investment of $750,000 which will give a return of $100,000, $150,000, $200,000, $250,000 and $ 250,000 for the next 5 years. Then Calculate the Net Present Value (NPV) which can be used to decide which opportunity is better and should be invested in. For Project A 6 For Project A 7 8 Discount Rate 9 Initial Investment 10 11 12 13 14 15 16 17 Year 1 2 3 4 5 B 10% $1,000,000 Cash Flows $300,000 $300,000 $300,000 $300,000 $300,000 For Project B 23 For Project B 24 25 Discount Rate 26 Initial Investment 27 28 29 30 31 32 33 34 Year 1 2 3 4 5 B 10% $750,000 Cash Flows $100,000 $150,000 $200,000 $250,000 $250,000

Name: Q#5. [10 pts] Calculating Net Present Values and Making the Financial
Uploaded: 2024-03-20T06:50:59.000Z
Channel: Bartleby
Description: Q#5. [10 pts] Calculating Net Present Values and Making the Financial DecisionsGeneral Electric (GE) has the opportunity to invest in 2 projects. Project A requires an investment of $1Mwhich will give a return of $300,000 each year for 5 years. Proj

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter12: Capital Investment Analysis

Section: Chapter Questions

Problem 3CMA

See similar textbooks

Similar questions

Redbird Company is considering a project with an initial investment of $265,000 in new equipment that will yield annual net cash flows of $45,800 each year over its seven-year life. The companys minimum required rate of return is 8%. What is the internal rate of return? Should Redbird accept the project based on IRR?
3.4 Amber was evaluating the feasibility of a project that has an initial investment of $205,000 and subsequent investments of $155,000 in the 1st and 2nd years. From the 3rd year onwards, it will generate cost savings of $200,000 every year for 8 years. a. If the project has a terminal value of $100,000, what is the Internal Rate of Return (IRR)? b. Should the project be accepted if the company's cost of capital is 23.00%? Yes/No Kindly use all the decimals. DO NOT ROUND
Pm.3 Find out the profitability index (PI) of the following project assuming the required rate of return is 8%. Will you accept the project? Why? year 0 1 2 3 4 5 Cash Flow ($) -250,000 50,000 40,000 120,000 80,000 45,000 Group of answer choices Accept the project because the PI is equal to 1.06, which is larger than 0. Accept the project because the PI is equal to 0.98, which is larger than 0. Reject the project because the PI is equal to 1.06, which is larger than 1. Reject the project because the PI is equal to 0.98, which is lower than 1. Accept the project because the PI is equal to 1.06, which is larger than 1.
more. 3. Net present value method Aa Aa Consider the case of Underwood Manufacturing: Underwood Manufacturing is evaluating a proposed capital budgeting project that will require an initial investment of $120,000. The project is expected to generate the following net cash flows: Year Cash Flow Year 1 $37,600 Year 2 $50,500 Year 3 $45,000 Year 4 $41,900 Assume the desired rate of return on a project of this type is 10%. What is the net present value of this project? -$4,415.10 $18,344.79 -$7,244.50 $23,914.50 Suppose Underwood Manufacturing has enough capital to fund the project, and the project is not competing for funding with other projects. Should Underwood Manufacturing accept or reject this project? Accept the project Reject the project
3 NPV and IRR Benson Designs has prepared the following estimates for a long-term project it is considering. The initial investment is $18,250, and the project will yield cash inflows of $4,000 per year for 7 years. The firm has a cost of capital of 10%. a. Determine the net present value (NPV) for the project. b. Determine the internal rate of return (IRR) for the project. c. Would you recommend that the firm accept or reject the project? a. The NPV of the project is $ (Round to the nearest cent.) b. The IRR of the project is%. (Round to two decimal places.) c. Would you recommend that the firm accept the project? (Select the best answer below.) OYes O No
[NPV|CFs] The firm is considering a project which requires a $5,000 investment and is expected to generate expected cashflows at the end of the next two years in the amount of $4,000. Hurdle rate = 10%. What is the project’s NPV?
A3 5c. 5. We have two independent and mutually exclusive projects, A and B. Project A requires an initial investment of $1500, and will yield $800 of cash inflows for the next three years. Project B requires an initial investment of $5000, and will yield $1,500 of cash inflows for the next five years. The required return on each project is 10%. c. Which project should be chosen?
4- Consider the following projects, X and Y where the firm can only choose one.Project X costs $600 and has cash flows of $400 in each of the next 2 years.Project Y also costs $600, and generates cash flows of $500 and $275 for thenext 2 years, respectively. Sketch a net present value profile for each of theseprojects. Which project should the firm choose if the cost of capital is 10percent? What if the cost of capital is 25 percent? Show all work.----------------------------------------------------------------------
K You have been offered a unique investment opportunity. If you invest $11,300 today, you will receive $565 one year from now, $1,695 two years from now, and $11,300 ten years from now. a. What is the NPV of the opportunity if the cost of capital is 5.7% per year? Should you take the opportunity? b. What is the NPV of the opportunity if the cost of capital is 1.7% per year? Should you take it now? a. What is the NPV of the opportunity if the cost of capital is 5,7% per year? If the cost of capital is 5.7% per year, the NPV is $. (Round to the nearest cent.)
You are considering an investment opportunity that requires an initial investment of $150 million in period 0. The project will generate only one future payment of $168 million at the end of the first year. The cost of capital is 8% . What is the IRR for the project? [Note that getting the actual value should not require trial and error or a financial calculator, because this is a simple case.] A. 114% B. 8% C. 20% D. 12% E. 10.7% F. 5.6% G. 14% H. 112%
Question 4a) A firm has a choice between two investment projects, all of which involve an initial outlay of GH¢36,000. The returns at the end of the next 4 years are given below. If the interest rate is 15%, say whether each project is viable or not, and which is the best investment.Year Project A Project B1 15,000 5,0002 15,000 10,0003 15,000 20,0004 15,000 25,000All values are given in GH¢. b) A factory increase its production by 712% and produced 1290 tonnes. How many tonnes did she produce before? c) If we place GH¢100 in the savings account that yields 12% compounded quarterly, what nearest GH¢ would our investment grow to at the end of 5 years?
engineering economy (multiple choice) 3.) Consider a project which involves the investment of P100,000.00 now and P100,000 at the end of one year. Revenues of P150,000 will be generated at the end of years 1 and 2. What is the net present value of this project if the annual interest rate is 10%? a.) P69,421.50 b.) P67,421.50 c.) P68,421.50 d.) P65,421.50