Week 3 Homework

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5.37 solve using formulas

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Calculate the conventional benefit-cost ratio for the alternative: Initial Investment Revenues Costs Salvage Value Useful life MARR Select one: a.1.3130 b.1.2960 c.1.4659 d.1.2114 e.1.3681 400000 190000 60000 100000 6 0.1

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Value/other investment criteria (i Saved Help Save Consider the following two projects: Cash flows Project A Project B -$270 CO -$270 С1 115 143 C2 115 143 Сз 115 143 C4 115 a. If the opportunity cost of capital is 10%, which of these two projects would you accept (A, B, or both)? b. Suppose that you can choose only one of these two projects. Which would you choose? The discount rate is still 10%. Which one would you choose if the cost of capital is 15%? d. What is the payback period of each project? e. Is the project with the shortest payback period also the one with the highest NPV? f. What are the internal rates of return on the two projects? g. Does the IRR rule in this case give the same answer as NPV? h-1. If the opportunity cost of capital is 10%, what is the profitability index for each project? h-2. Is the project with the highest profitability index also the one with the highest NPV? h-3. Which measure should you use to choose between the projects? Complete this question by…

pm.5   Find the expected rate of return using the three estimates provided in the table below for a project. Data Pessimistic Most Likely Optimistic First Cost, $ 1,052 1,000 1000 Benefits / Year 190 198 200 Life , Years 9 12 12 Salvage Value 0 0 100     A. 11.93%   B. 16.33%   C. 13.17%   D. 14.20%

6) Year Project A Project B Difference     0 -75000 -75000 0     1 26300 24000 2300     2 29500 26900 2600     3 45300 51300 -6000     Crossover rate 14.60%   Hi I need help with the following question! Thank you! Are you going to accept project A or project B? Why?

1) You are considering the following mutually exclusive projects: (15pts) 1 4. Project A -400 50 50 50 230 230 Project B -600 300 300 50 50 50 if the firm required return (WACC) is 10%: a. What is the NPV of project A? b. What is the IRR of project A? C. What is the NPV of project B? d. What is the IRR of project B? e. Which one you must select? a. b. C. d. e.

FIN 6020 v19f Perez Company: Mutually Exclusive Projects with Different Lives. Ch 10 (10-17) Again, you are considering two mutually exclusive projects. Machine A: This project costs $10 million. The expected net cash flows are $4 million per year for 4 years, when is to be replaced. Machine B: It costs $15 million, and has expected cash flows of $3.5 per year for 8 years, when it will be replaced. The cost of capital is 10%. Machine prices are expected to stay steady as production efficiencies are expected to offset inflation. Evaluate these projects. a. Calculate NPV, IRR, Replacement Chain, and Equivalent Annual Annuity. b. Which project should be company accept?