shobha Three projects are independent, and the company has only $500,000 to invest. Project A requires an investment of $500,000 and has anet present value of $125,000 using the company's cost of capital. Project B requires an investment of $250,000 and has a net presentvalue of $80,000 using the company's cost of capital. Project C requires an investment of $250,000 and has a net present value of$65,000 using the company's cost of capital. Which projects(s) should be accepted?O Because the projects are independent, more than one project can be accepted. Accept Projects A, B, and because they allhave positive net present values.ImO Because the projects are independent, more than one project can be accepted. Accept both Project B and Project C becausetheir combined net present value is larger than Project A's net present value.Because the projects are independent, only one project can be accepted. Accept Project A because it has the highest netpresent value.O Because the projects are independent, more than one project can be accepted. Accept Project A because it has the highestnet present value.8g9aOA82

The net present value is the difference between the present value of the cash inflows and the…

Answered: Three projects are independent, and the…

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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Sohar Metal Company is considering three proposals for long term investment. Due to limitation on capital, the company can accept only one out three projects. The following information is available relating to : Aluminium Alloys Plant Steel Plant (100,000) 60,000 50,000 40,000 30,000 25,000 10,000 Plant Initial investment (RO) | Operating Profit before depreciation year 1 Operating Profit before depreciation year 2 |Operating Profit before depreciation year 3 Operating Profit before depreciation year 4 Operating Profit before depreciation year 5 | Scrap value at the end of 5 years (100,000) 54,000 46,000 40,000 36,000 25,000 10,000 (100,000) 50,000 50,000 40,000 30,000 30,000 5,000 The company's standard payback period is 2 years and standard ARR is 12%. The cost of capital is 10%? You are required to evaluate the above three projects based on following evaluation techniques: (i) (ii) (ii) Accounting Rate of Return (ARR) Payback Period (PBP) Net Present Value (NPV)
Zellars, Inc. is considering two mutually exclusive projects, A and B. Project A costs $ 95,000 and is expected to generate $65,000 in year one and $75,000 in year two. Project B costs $120,000 and is expected to generate $ 64,000 in year one, $67,000 in year two, $ 56,000 in year three, and $45,000 in year four. Zellars, Inc's required rate of return for these projects is 10% . The modified internal rate of return for Project A is
Tempura, Inc., is considering two projects. Project A requires an investment of $48,000. Estimated annual receipts for 20 years are $19.000; estimated annual costs are $12,500. An alternative project, B, requires an investment of $77,000, has annual receipts for 20 years of $23,000, and has annual costs of $18,000. Assume both projects have a zero salvage value and that MARR is 11.0 %/year. Click here to access the TVM Factor Table Calculator Part a What is the present worth of each project? Project A. $ Project B: $
McKnight Company is considering two different, mutually exclusive capital expenditure proposals. Project A will cost $450,000, has an expected useful life of 11 years, a salvage value of zero, and is expected to increase net annual cash flows by $73,500. Project B will cost $274,000, has an expected useful life of 11 years, a salvage value of zero, and is expected to increase net annual cash flows by $46,800. A discount rate of 9% is appropriate for both projects. Click here to view the factor table. Compute the net present value and profitability index of each project. (If the net present value is negative, use either a negative sign preceding the number eg -45 or parentheses eg (45). Round present value answers to O decimal places, e.g. 125 and profitability index answers to 2 decimal places, e.g. 15.25. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Net present value - Project A $ Profitability index- Project A Net present value - Project…
McKnight Company is considering two different, mutually exclusive capital expenditure proposals. Project A will cost $430,000, has an expected useful life of 11 years, a salvage value of zero, and is expected to increase net annual cash flows by $70,500. Project B will cost $265,000, has an expected useful life of 11 years, a salvage value of zero, and is expected to increase net annual cash flows by $45,000. A discount rate of 9% is appropriate for both projects. Click here to view the factor table. Compute the net present value and profitability index of each project. (If the net present value is negative, use either a negative sign preceding the number eg -45 or parentheses eg (45). Round present value answers to 0 decimal places, e.g. 125 and profitability index answers to 2 decimal places, e.g. 15.25. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Net present value- Project A Profitability index - Project A Net present value- Project B…
Tamarisk Company is considering two different, mutually exclusive capital expenditure proposals. Project A will cost $537,000, has an expected useful life of 15 years and a salvage value of zero, and is expected to increase net annual cash flows by $69,000. Project B will cost $351,000, has an expected useful life of 15 years and a salvage value of zero, and is expected to increase net annual cash flows by $47,000. A discount rate of 8% is appropriate for both projects. Calculate the net present value and profitability index of each project. (If the net present value is negative, use either a negative sign preceding the number e.g. -45 or parentheses e.g. (45). Round present value answers to 0 decimal places, e.g. 125 and profitability index answers to 2 decimal places, e.g. 15.52. For calculation purposes, use 5 decimal places as displayed in the factor table provided, e.g. 1.25124.) Net present value Profitability index $ Project A $ Project B
McKnight Company is considering two different, mutually exclusive capital expenditure proposals. Project A will cost $523,000, has an expected useful life of 12 years, a salvage value of zero, and is expected to increase net annual cash flows by $72,100. Project B will cost $358,000, has an expected useful life of 12 years, a salvage value of zero, and is expected to increase net annual cash flows by $50,400. A discount rate of 7% is appropriate for both projects. Click here to view PV table. Compute the net present value and profitability index of each project. (If the net present value is negative, use either a negative sign preceding the number eg -45 or parentheses eg (45). Round present value answers to 0 decimal places, e.g. 125 and profitability index answers to 2 decimal places, e.g. 15.25. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Net present value - Project A Profitability index - Project A Net present value - Project B $…
Blossom Company is considering two different, mutually exclusive capital expenditure proposals. Project A will cost $450,000, has an expected useful life of 11 years, a salvage value of zero, and is expected to increase net annual cash flows by $73,500. Project B will cost $298,000, has an expected useful life of 11 years, a salvage value of zero, and is expected to increase net annual cash flows by $50,200. A discount rate of 9% is appropriate for both projects. Click here to view PV table. Compute the net present value and profitability index of each project. (If the net present value is negative, use either a negative sign preceding the number eg -45 or parentheses eg (45). Round present value answers to O decimal places, e.g. 125 and profitability index answers to 2 decimal places, e.g. 15.25. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Net present value - Project A Profitability index - Project A Net present value - Project B…
Trailer Treasures Inc. is considering two projects and must do one of them. Project A requires an investment of $35,000. Estimated annual receipts for 5 years are $14,000; estimated annual costs are $4,500. Alternatively, Project B requires an investment of $70,000 has annual receipts for 5 years of $20,000, and has annual costs of $4,500. Assume both proejcts have $10,000 salvage value and that MARR IS 15%/year. 1. What is the annual worth of Project A? 2. What is the annual worth of Project B? 3. Which project should be recommended? Why? Please show work through excel
A company has the option to invest in project A, project B, or neither (the projects are mutually exclusive and the company has no other investment options). Project A requires an initial investment of $100,000 today and provides cash flows of $30,000 a year for five years. Project B requires a $875,000 investment today and will have cash flows of $200,000 a year for 4 years, with a final cashflow of $300,000 in year 5. The firm's hurdle rate (discount rate) for these projects is 8%. Which project should be selected? O (a) A (b) В (c) Neither
Wildhorse Company is considering two different, mutually exclusive capital expenditure proposals. Project A will cost $435,000, has an expected useful life of 11 years and a salvage value of zero, and is expected to increase net annual cash flows by $74,600. Project B will cost $253,000, has an expected useful life of 11 years and a salvage value of zero, and is expected to increase net annual cash flows by $45,200. A discount rate of 10% is appropriate for both projects. Click here to view PV table.Compute the net present value and profitability index of each project. (If the net present value is negative, use either a negative sign preceding the number eg -45 or parentheses eg (45). Round present value answers to 0 decimal places, e.g. 125 and profitability index answers to 2 decimal places, e.g. 15.25. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Net present value - Project A $enter the number rounded to 2 decimal places…
McKnight Company is considering two different, mutually exclusive capital expenditure proposals. Project A will cost $523,000, has an expected useful life of 12 years, a salvage value of zero, and is expected to increase net annual cash flows by $72,100. Project B will cost $324,000, has an expected useful life of 12 years, a salvage value of zero, and is expected to increase net annual cash flows by $46,400. A discount rate of 7% is appropriate for both projects. Click here to view the factor table. Compute the net present value and profitability index of each proiect." Net present... Villav Net present value- Project B $ Profitability index - Project B 42312 1.12

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