Wonder Plc is considering two investment projects in another city and the estimated cash flows are as follows: Year Hotels Housing £ (m) £ (m) 0 Capital outlay (200) (250) Net cash flows 1 130 130 2 60 120 3 80 120 4 100 80 4 Residual value 20 40 The company’s cost of capital is 15%. Required: (a) Assess the viability of these two projects using NPV and Payback period as the appraisal techniques and advise Wonder Plc’s Board of Directors accordingly.
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Wonder Plc is considering two investment projects in another city and the
estimated cash flows are as follows:
Year Hotels Housing
£ (m) £ (m)
0 Capital outlay (200) (250)
Net cash flows
1 130 130
2 60 120
3 80 120
4 100 80
4 Residual value 20 40
The company’s cost of capital is 15%.
Required:
(a) Assess the viability of these two projects using
as the appraisal techniques and advise Wonder Plc’s Board of Directors
accordingly.
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- There are two projects under consideration by the Rainbow factory. Each of the projects will require an initial investment of $35,000 and is expected to generate the following cash flows: Use the information from the previous exercise to calculate the internal rate of return on both projects and make a recommendation on which one to accept. For further instructions on internal rate of return in Excel, see Appendix C.Wonder Plc is considering two investment projects in another city and the estimated cash flows are as follows: Year Hotels Housing £ (m) £ (m)0 Capital outlay (200) (250) Net cash flows1 130 1302 60 1203 80 1204 100 804 Residual value 20 40The company’s cost of capital is 15%.Required: Assess the viability of these two projects using NPV and Payback period as the appraisal techniques…Wonder Plc is considering two investment projects in another city and the estimated cash flows are as follows: Year Hotels Housing £ (m) £ (m)0 Capital outlay (200) (250) Net cash flows1 130 1302 60 1203 80 1204 100 804 Residual value 20 40The company’s cost of capital is 15%.Required:Assess the viability of these two projects using NPV and Payback period as the appraisal techniques…
- Wonder Plc is considering two investment projects in another city and the estimated cash flows are as follows: Year Hotels Housing £ (m) £ (m)0 Capital outlay (200) (250) Net cash flows1 130 1302 60 1203 80 1204 100 804 Residual value 20 40The company’s cost of capital is 15%.Required:(a) Assess the viability of these two projects using NPV and Payback period as the appraisal techniques…Wonder Plc is considering two investment projects in another city and the estimated cash flows are as follows: Year Hotels Housing £ (m) £ (m) (200) (250) 0 Capital outlay Net cash flows 1 130 130 2 60 120 3 80 120 4 100 80 4 Residual value 20 40 The company's cost of capital is 15%. Required: (a) Assess the viability of these two projects using NPV and Payback period as the appraisal techniques and advise Wonder Plc's Board of Directors accordinglyFollowing is information on two alternative investment projects being considered by Tiger Company. The company requires a 7% return from its investments (PV of $1. EV of $1. PVA of $1, and EVA of $1) (Use appropriate factor(s) from the tables provided.) Initial investment Net cash flows in: Year 1 Year 2 Year 3 Required A Required B Project X1 Year 11 Year 2 Year 3 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? Totals Initial investment Net present value Complete this question by entering your answers in the tabs below. Project X2 Year 1 Year 2 Year 3 Totais Initial investment S Project X1 $ (116,000) Compute each project's net present value. (Round your final answers to the nearest dollar) Net Cash Flows Present Value of Net Cash Flows S 43,000 53,500 78,500 Required C O 0 Present Value of 1 at 7% Project X2 $ (192,000) $ 87,000 77,000…
- A company is considering three alternative investment projects with different net cash flows. The present value of net cash flows is calculated using Excel and the results follow. Potential Projects Present value of net cash flows (excluding initial investment) Initial investment Project A $ 8,328 (10,000) Project B $ 10,809 (10,000) Project C $ 10,685 (10,000) a. Compute the net present value of each project. b. If the company accepts all positive net present value projects, which of these will it accept? c. If the company can choose only one project, which will it choose on the basis of net present value? Complete this question by entering your answers in the tabs below. Required A Required B Required C Compute the net present value of each project. Potential Projects Project A Project B Project C Present value of net cash flows Initial investment Net present valueWonder Plc is considering two investment projects in another city and the estimated cash flows are as follows: Year HOTELS HOUSING £ (m) £ (m) 0 Capital outlay (200) (250) Net cash flow 1 130 130 2 60 120 3 80 120 4 100 80 4 Residual value 20 40 Required: (a) Assess the viability of these two projects using NPV and Payback period as the appraisal techniques and advise Wonder Plc’s Board of Directors accordingly. (b) Explain the importance of Payback period to the CEO.Wonder Plc is considering two investment projects in another city and the estimated cash flows are as follows: Year Hotels$(m) Housing $(m) 0 Capital outlay (200) (250) Net cash flows 1 130 130 2 60 120 3 80 120 4 100 80 4 Residual value 20 40 The company’s cost of capital is 15%. (a) Assess the viability of these two projects using NPV and Payback period as the appraisal techniques and advise Wonder Plc’s Board of Directors accordingly. (b) Explain the importance of Payback period to the CEO.
- Assume you are evaluating two mutually exclusive projects, the cash flows of which appear below and that your company uses a cost of capital of 13% to evaluate projects such as these. Time Project A Cash Flows Project B Cash Flows 0 -$46,800 -$63,600 1 -21,600 20,400 2 43,200 20,400 3 43,200 20,400 4 43,200 20,400 5 -28,800 20,400 Sketch the NPV profile for projects A & B. Determine the crossover point for these projects’ NPV profiles.Wonder Plc is considering two investment projects in another city and theestimated cash flows are as follows:Year Hotels Housing£ (m) £ (m)0 Capital outlay (200) (250) Net cash flows1 130 1302 60 1203 80 1204 100 804 Residual value 20 40The company’s cost of capital is 15%.Required: (b) Explain the importance of Payback period to the CEO.A company is considering three alternative investment projects with different net cash flows. The present value of net cash flows is calculated using Excel and the results follow. Potential Projects Present value of net cash flows (excluding initial investment) Initial investment Project A $ 11,226 (10,000) Project B $ 10,568 (10,000) a. Compute the net present value of each project. b. If the company accepts all positive net present value projects, which of these will it accept? c. If the company can choose only one project, which will it choose on the basis of net present value? Complete this question by entering your answers in the tabs below. Required A Required B Required C Compute the net present value of each project. Potential Projects Project A Project B Project C Present value of net cash flows Initial investment Net present value $ $ $
