FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Suppose that you could invest in the following projects but have only $29,700 to invest. How would you make your decision and in which projects would you invest?
Project | Cost | |||
---|---|---|---|---|
A | $ 7,850 | $ 3,200 | ||
B | 11,060 | 6,460 | ||
C | 9,200 | 4,150 | ||
D | 6,540 | 3,090 |
You should invest in which of the following options? |
A & B only
B & C only
B & D only
A, B, & C
B, C & D
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- Consider a project with the following cash flows. Year Cash Flow 0 -$17,000 1 45,000 2 -29,000 What’s the IRR of the project? If a firm’s cost of capital is 17%, should the firm accept the project? Group of answer choices 53.8%; accept the project 10.9% and 53.8%; accept the project 10.9%, and 53.8%; reject the project 10.9%; reject the projectarrow_forwardExercise 24-10 (Algo) Net present value, unequal cash flows, and profitability Index LO P3 Following is information on two alternative investment projects being conside return from its investments. (PV of $1, FV of $1. PVA of $1, and FVA of $1) Note: Use appropriate factor(s) from the tables provided. y Tiger Company. The company requires a 4% Initial investment Project X1 $ (130,000) Project X2 $ (220,000) Net cash flows in: Year 1 Year 2 Year 3 50,000 97,500 60,500 87,500 85,500 77,500 a. Compute each project's net present value. b. Compute each project's profitability index. c. If the company can choose only one project, which should it choose on the basis of profitability index? Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Required A Required B Required C Compute each project's net present value. Note: Round your final answers to the nearest dollar. Net Cash Flowe Present Value of 1 at 4% Present Value of Net Cash…arrow_forwardYou are considering two similar but mutually exclusive investments. You have calculated that: Project A has an NPV = $7,600 and IRR = 19.80% Project B has an NPV = $11,200 and IRR = 17.30% Which project would you select? Project A O Project Barrow_forward
- The answer is project B but please answer why that is the correct answer. Engineering economic questionarrow_forward3. Lopez Industries has identified the following two mutually exclusive capital investment projects: Year Project A Project B 0 1 2 3 4 -16000 400 800 13000 -15500 12500 8000 800 14000 800 What is the IRR for each of these projects? If you apply the IRR decision rule, which project should the company accept? Is this decision necessarily correct? If the required return is 11%, what is the NPV for each of these projects? Which project should the firm accept if they apply the NPV rule?arrow_forwardThe following table gives the available projects (in $millions) for a firm. A 96 146 B C D 26 66 56 76 71 -16 Multiple Choice 224 If the firm has a limit of $234 million to invest, what is the maximum NPV the company can obtain? 307 331 E 156 36 383 F G 46 26 38 16 NPV Initial investmentarrow_forward
- You are considering the following two mutually exclusive investments: Project Year 0 Year 1 Year 2 A -$80 0 $120 B -$40 $28 $28 Is the IRR of Project B larger or smaller than the IRR of Project A?arrow_forwardPut answer in table format Yokam Company is considering two alternative projects. Project 1 requires an initial investment of $560,000 and has a present value of cash flows of $2,200,000.0. Project 2 requires an initial investment of $5,000,000 and has a present value of cash flows of $7,000,000. 1. Compute the profitability index for each project.2. Based on the profitability index, which project should the company prefer?arrow_forwardSuppose that you could invest in the following projects but have only $29,700 to invest. How would you make your decision and in which projects would you invest? Project Cost A $7,850 B C D 11,060 9,200 6,540 NPV $3,200 6,460 4,150 3,090 You should invest in project(s)arrow_forward
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