Question Five: for an investment project which is shown its payment details in Figure (2), it is desired to evaluate the project economically to decide accept the project or no. Choose the correct answer for the following: Figure (2) $20,000 3 A=$8000 A=$5000 i=20% $10,000
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- Consider the following two mutually exclusive projects:Year Cash Flow (X) Cash Flow (Y)0 -$365,000 -$38,0001 25,000 16,0002 65,000 12,0003 65,000 17,0004 425,000 15,000Whichever project you choose, if any, you require a 13 percent return on your investment. i. Which investment will you choose if you use the payback decision criteria? Justify your answer.ii. Which investment will you choose if you use the NPV decision criteria? Justify your answer.iii. Which project will you choose ultimately based on your answers above?Q4: Consider the following two mutually exclusive projects, you require a 15 percent return on your investment: Year Cash Flow (A) Cash Flow (B) -18,000 10,000 -170,000 10,000 25,000 25,000 380,000 1 6,000 10,000 3 4 8,000 a) If you apply the payback criterion, which investment will you choose? Why? b) If you apply the discounted payback criterion, which investment will you choose? Why? c) If you apply the NPV criterion, which investment will you choose? Why? d) If you apply the IRR criterion, which investment will you choose? Why? e) If you apply the profitability index criterion, which investment will you choose? Why? f) Based on your answers in (a) through (e), which project will you finally choose? Why? g) What is the relationship between IRR and NPV? Are there any situations in which you might prefer one method over the other? ExplainConsider 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?
- Q4: Consider the following two mutually exclusive projects, you require a 15 percent return on your investment: Year Cash Flow (A) -170,000 10,000 25,000 Cash Flow (B) -18,000 10,000 6,000 10,000 8,000 1 3 25,000 4 380,000 a) If you apply the payback criterion, which investment will you choose? Why? b) If you apply the discounted payback criterion, which investment will you choose? Why? c) If you apply the NPV criterion, which investment will you choose? Why? d) If you apply the IRR criterion, which investment will you choose? Why? e) If you apply the profitability index criterion, which investment will you choose? Why? f) Based on your answers in (a) through (e), which project will you finally choose? Why? 8) What is the relationship between IRR and NPV? Are there any situations in which you might prefer one method over the other? Explain.5ו Comparing Investment Criteria. onsiuer uie 1onOwing two inutuany exclusive projects: Cash Flow (B) 1TT Year Cash Flow (A) S415,000 -$3,500 49,000 1,920 57.000 1,390 74,000 1,420 530,000 1,050 4 Whichever project you choose, if any, you require a 13 percent return on your investment. a. If you apply the payback criterion, which investment will you choose? Why? b. If you apply the NPV criterion, which investment will you choose? Why? 8If you apply the IRR criterion, which investment will you choose? Why2 d. If you apply the profitability index criterion, which investment will you choose? Why? e. Based on your answers in (a) through (d), which project will you finally choose? Why?Comparing Investment Criteria [L01,2,3,5,7] Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 -$300,000 -$40,000 1 20,000 19,000 2 50,000 12,000 3 50,000 18,000 4 390,000 10,500 Whichever project you choose, if any, you require a 15 per cent return on your investment. a. If you apply the payback criterion, which will you choose? Why? b. If you apply the discounted payback criterion, which investment will you choose? Why? c. If you apply the NPV criterion, which investment will you choose? Why? d. If you apply the IRR criterion, which investment will you choose? Why? e. If you apply the profitability index criterion, which investment will you choose? Why? f. Based on your answers in (a) through (e), which project will you finally choose? Why? Please explain your calculations and conclusions
- Question 2 Compute the B/C ratio at i-10%, for the following project and justify if you selected it or not, based on economic view point (Banefits) $30 $30 $ 20 $ 20 $5 $5 $8 $8 $10 $10 (Recurring costs) (Investment)Consider the following two mutually exclusive projects. Time Project A Project B 0 -$300 -$405 1 -$387 $134 2 -$193 $134 3 $100 $134 4 $600 $134 5 $600 $134 6 $850 $150 7 $180 $284 What is each project’s payback, discounted payback, IRR, and NPV with a cost of capital of 12%? Which project should be selected?17: Consider the following 2 mutually exclusive projects: Year Cash flow A Cash Flow B 0 -291000 -41600 1 37000 20000 2 55000 17600 3 55000 17200 4 366000 14000 Whichever project you choose, if any, you require a return of 11% on your investment. If you apply the payback criterion, which investment will you choose? Why? If you apply the discounted payback criterion, which investment will you choose? Why? If you apply the NPV criterion, which investment will you choose? Why? If you apply the IRR criterion, which investment will you choose? Why? If you apply the profitability index criterion, which investment will you choose? Why? Based on your answers in parts A through E, which project will you finally choose? Why?
- The following information is available on two mutually exclusive projects. Project Year 0 Year 1 Year 2 Year 3 Year 4 A -$700 $200 $300 $400 $500 B -$700 $600 $300 $200 $100 If the required rate of return is 10%, which project should be selected using the net present value (NPV) method? Group of answer choices A BThe net present value of four projects is given below: Project W: $24,000 Project X: $ 11,000 Project Y: $20,000 Project Z: $14,000 The four projects given above require the same amount of investment. How would you rank them using net present value (NPV) method? Group of answer choices X, Z, Y, W W, X, Y, Z W, Y, Z, XX, Y, Z, Wa. 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.
