Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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which of the two projects, Project O and Project Y, should the company pursue? Why? The firm's cost of capital has been determined at 9%
Project O Project Y
Initilal Investment P50,000 P48 000
Cash Flows 1 P20,000 30,000
2 25,000 35,000
3 15,000 40,000
4 20,000 10,000
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- 7. Two mutually exclusive investment projects have the following forecasted cash flows: INTERMEDIATE Year A $–20,000 $–20,000 1 +10,000 +10,000 3 +10,000 4 +10,000 +60,000 a. Compute the internal rate of return for each project. b. Compute the net present value for each project if the firm has a 10 percent cost of capital. c. Which project should be adopted? Why?arrow_forwardB Shaylee Corporation has $2.00 million to invest in new projects. The company's managers have presented a number of possible options that the board must prioritize. Information about the projects follows: Initial investment. Present value of future cash flows Project A $ 420,000 770,000 Required: 1. Is Shaylee able to invest in all of these projects simultaneously? 2-a. Calculate the profitability index for each project. 2-b. What is Shaylee's order of preference based on the profitability index? Complete this question by entering your answers in the tabs below. Project B $ 235,000 420,000 Req 1 Req 2A and 28 Is Shaylee able to invest in all of these projects simultaneously? Is Shaylee able to invest in all of these projects simultaneously? Reg 1 Req 2A and 2B > Project C $725,000 1,205,000 Project Di $950,000 1,565,000arrow_forwardHere are the cash flows for two mutually exclusive projects: Project C0 C1 C2 C3 A -$20,000 +$8,000 +$8,000 +$ 10,000 B - 20,000 0 +10,000 + 25,000 a. What is the IRR of each project? b. Investor's expected return is based on risk free rate equal 3% and market risk premium 18%, given beta 1.25, evaluate its investment criteria.arrow_forward
- A company is analyzing two mutually. exclusive projects, 5 and I, with the following cash flows Project S - $1,000 Project L - $1,000 + $877.34 $10 2 + $260 $260 $100 company's WACC is 9.5%. What is the project? The IRR of the better 3 $15 $380 4 $5 $795.76 Consider Pend ts and B 13. Ifarrow_forwardConsider the following two investment alternatives: The firm's MARR is known to be 15%.(a) Compute the IRR of Project B.(b) Compute the PW of Project A. (c) Suppose that Projects A and B are mutually exclusive. Using the IRR, whichproject would you select?arrow_forwardYou are offered the chance to participate in a project that produces the following cash flows: Co C₁ C₂ +$ 6,500 +$ 4,750 -$ 14,000 The internal rate of return is 14.7%. a. If the opportunity cost of capital is 14%, what is the net present value of the project? Note: Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places. Answer is complete but not entirely correct. Net present value $ b. Will you accept the offer? Yes No 43.77 Xarrow_forward
- an.3 answer must be in proper format or i will give down votearrow_forwardA Company is considering two mutually exclusive projects whose expected net cash flows are in the table below. The company's WACC is 15%. What is the NPV for Project Y? What is the NPV for Project Z? What is the IRR for Project Y? What is the IRR for Project Z? Which Project, if any, should you choose? Time Project Y Project Z 0 $(420.00) $(950.00) | $(572.00) $270.00 2 $(189.00) $270.00 3 $(130.00) $270.00 4 $1,300.00 $ 270.00 5 $720.00 $270.00 6 $980.00 $270.00 7 $(225.00) $270.00 Please show in excel I think im getting the wrong valuesarrow_forwardUse the information below to answer Question#40: GIVEN: The XYZ Company is considering the following project with its corresponding financial data. The Company requires a 9% return from its investments. $ 500,000 $ 200,000 $ 225,000 $ 245,000 Initial investment: Expected Cash in-flow Year 1: Expected Cash in-flow Year 2: Expected Cash in-flow Year 3: Present Value Factor of 1 at 9%: n=1: 0.91743 n=2: 0.84168 n=3: 0.77218 40) Choose from one of the following that accurately depicts this decision: A) This investment should not be considered because NPV is a negative $62,048 B) This învestment should be considered because NPV equals positive $62,048 C) This investment should be considered because the IRR for this investment is obviously less than its Required Rate of Return D) B and Care both correctarrow_forward
- Compute the NPV statistic for Project Y. Explain whether or not the firm should accept or reject the project with the cash flows shown in the chart below if the appropriate cost of capital is 10%. Year 0 = -8,000, year 1 = 3,350, Year 2 = 4,180, Year 3 = 1,520, Year 4 = $300arrow_forwardQ.2. You must analyze two projects, X and Y. Each project costs $10,000, and the firm's WACC is 12%. The expected cash flows as follows: Project X Project Y 0 -$10,000 -$10,000 $6,500 $3,500 2 $3,000 $3,500 3 $3,000 $3,500 4 $1,000 $3,500 a. Calculate each project's NPV. b. According to NPV method, which project(s) should be accepted, and why?arrow_forward1) A company is considering two projects. The projects have the following expected cash flows: t 0 1 2 3 Project X cash flow Project Y cash flow. -350,000 100,000 100,000 200,000 -120,000 10,000 20,000 30,000 (a) Which project should they prefer if the cost of capital is í = 2%? (b) Which project should they prefer if the cost of capital is i = 12%? 4 50,000 30,000 Option A B (c) Which of the following set of options represents the internal rates of return of the two projects? Project X IRR Project Y IRR 7.5% 13.9% 8.9% 12.5 12.5% 8.9% 13.9% 7.5% C D 5 6 30,000 10,000 30,000 40,000arrow_forward
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