FIN550_V-III_homework_capital_budgeting

You are a financial analyst for the Hittle Company. The director of capital budgeting has asked you to analyze two proposed capital investments, Projects X and Y. Each project has a cost of $10,000, and the cost of capital for each is 12% for both projects. The projects’ expected net cash flows are as follows:   Expected Net cash flows Year Project X Project Y   0 -10000 -10000   1 6350 3600   2 2988 3700   3 3145 3500   4 945 3500   Calculate each project’s payback period, net present value (NPV), internal rate of return (IRR), and profitability index (PI)

You are considering the following two projects for investment:                               Project A                    Project B Year 0                 ($10000)                        ($5000) Year 1                     $3000                             $3000 Year 2                     $7000                              $4000 Year 3                      $9000                              $5000 You must conduct an analysis using your knowledge of capital budgeting (NPV, IRR ect, ) and time value of money to decide which of the options is better. All analysis must be done in Excel. (This will require all calculations to be done using cell references and excel functions). Your analysis will require you to: A. Calculate thefollowing values for the investment proposals: i. The payback period assuming end-of-the-year cash flows. ii. The discounted payback period assuming a required rate of return of 10% and ending of-the-year cash flows. iii. The NPV of each project. iv. The PI of each…

OPPfel Hospitality Consulting Inc. has two similar financial projects to offer one of its corporate clients in the hospitality industry. OPPfel wants to evaluate a set of capital budgeting projects and come up with the best decision according to the project’s IRR and PI for the client. NINV and NCF data for both of the projects are shown in the data table below: Year Project AR Project BF 0 -$100,000 -$100,000 1 $70,000 $20,000 2 $60,000 $50,000 3 $20,000 $100,000 If the minimum required rate of return is 10.00% for both of the capital budgeting projects, which one of the projects provides a better investment decision that OPPfel can consult to the its client?

Net Present Value (NPV) In this assignment, you are required to prepare a PowerPoint presentation reviewing 3 projects. You will calculate the NPV, IRR, and payback period for each project. Utilizing the capital budgeting calculations, you will need to select the best investment for the company. These calculations will be based on the following scenario: AIU Industries has 3 potential projects to consider, all with an initial cost of $1,250,000. The company prefers to reject any project with a 4-year cut-off period for recapturing initial cash outflow. Given the cost of capital rates and the future cash flow for each project, determine which project the company should accept. Project AProject Project U Cash Flow Year 1 250,000 450,000 250,000 Year 2 250,000 450,000 400,000 Year 3 250,000 450,000 600,000 Year 4 250,000 450,000 800,000 Year 5 400,000 400,000 200,000 Year 6 400,000 400,000 800,000 Year 7 400,000 400,000 600,000 Year 8 400,000 400,000 200,000 Cost of Capital 4% 6% 8%

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You are a financial analyst for the Hittle Company. The director of capital budgeting has asked you to analyze two proposed capital investments, Projects X and Y. Each project has a cost of $10,000, and the cost of capital for each is 12%. The projects' expected net cash flows are as follows: Expected Net Cash Flows Year Project X Project Y -S10,000 -$10,000 6,500 3,500 3,000 3,500 3,500 3,500 3,000 1,000 a. Calculate each project's payback period, net present value (NPV), internal rate of return (IRR), modified internal rate of return (MIRR), and profitability index (PI). b. Which project or projects should be accepted if they are independent? c. Which project should be accepted if they are mutually exclusive?

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SUPERIOR Company Limited is considering the following projects for inclusion in its capital budget for year 2021.The projects have equal risks and the capital outlay required is as follows: Project Investment required Project  Investment Requirement  Return    $000 $000 1 24,000 5520 2 9600 3072 3 7000 980 4 4800 864 5 3200 640 6 1400 392 As the Divisional Manager, you are to decide which of the projects to accept. The company has a cost of capital of 15% with $60million available to the division for investment purposes.Required: Compute the total investment, total return on capital invested and residual income on each of the following assumptions, indicating the preferred project: The Company has a rule that all projects promising at least 20% or more should be accepted.  The divisional manager is evaluated on his ability to maximise his return on capital investment.  The divisional manager is expected to maximise residual income as computed by using…

The following data table shows the estimated cash flows for two mutually exclusive capital budgeting projects that Glan Event Company can invest in. The cost of capital for both projects is 10.00%. Based on the table and the information given, determine both project’s NPV and IRR and decide which one yields a better outlook for the decision rationale of the projects. Year Project X Project Y 0 -$120,000 -$120,000 1 $100,000 $20,000 2 $40,000 $50,000 3 $10,000 $100,000

Appelbaum Inc. is comparing several alternative capital budgeting projects as shown below:                                                                                          Projects                                                                                         A                  B                       C      Initial investment                                   $80,000      $120,000        $160,000 Present value of net cash flows             90,000         110,000          200,000 Using the net present value, how many of the projects are available?? Group of answer choices

Problem B: A firm must choose from six capital budgeting proposals outlined below.  The firm is subject to capital rationing and has a capital budget of Php 1,000,000; the firm's cost of capital is 15%. Project          Initial Investment(Php)       IRR        NPV (Php)   _______          __________________            ___                 ______         1                    200,000                    19%               100,000     2                   400,000                      17%                20,000     3                  250,000                      16%                 60,000     4                  200,000                      12%                  (5,000)     5                  150,000                     20%                  50,000    6                    400,000                    14.5%              150,000   *Using Internal Rate of Return approach of ranking projects, which projects should the firm accept?

Part 3: Capital Budgeting and Project Evaluation Case Study: Assume that the company, where you are working as a team in Financial Department, is considering a potential project with a new product. It will require the company to buy a new equipment that will generate the same revenue for the company each year. The table below shows the initial and annual costs for each option. 3.1. Capital Budgeting Decision Making: Perform capital budgeting technique based on Equivalent Annual Cost (EAC) to advise the Company Management which option should be chosen if the relevant discount rate is 9%? Costs Option A Option B Initial Investment 1,400,000 1,500,000 Year 1 35,000 25,000 Year 2 35,000 25,000 Year 3 35,000 25,000 Year 4 35,000 25,000 Year 5   25,000 3.2. Risk Analysis and Project evaluation: Assume that the company finally chose Option B. It expects to sell 600,000 units of the new product for an average price of $15 per unit. The…

Suppose a company has the following three projects and limits it capital budget to $50,000. Projects Present Value of Cash Inflows Initial Investment A $40,000 $25,000 B 37,500 25,000 70,000 50,000 1. Calculate the projects' NPVs. 2. Calculate the projects' PIs. 3. Which project(s) should the company choose? Why?

Question 4: Capital Budgeting a). Consider the following two mutually exclusive projects: YEAR 0 CASH FLOW (A) -$300,000 1 20,000 2 70,000 3 80,000 4 400,000 CASH FLOW (B) -$39,000 18,000 12,000 18,000 19,000 Whichever project you choose, if any, you require a 15 percent return on your investment. (i) If you apply the payback period (PBP) criterion, which investment will you choose? Why? (ii) If you apply the net present value (NPV) criterion, which investment will you choose? Why? (iii)If you apply the profitability index (PI) criterion, which investment will you choose? Why? (iv) If you apply the internal rate of return (IRR) criterion, which investment will you choose? Why? (v) Based on your answers in (i) through (iv), which project will you finally choose? Why? Examiner: Prof. Ebenezer Bugri Anarfo Page 9 b). You are trying to determine whether to expand your business by building a new manufacturing plant. The plant has an installation cost of $15 million, which will be…

.Assume you are the chief financial officer at Lehman Memorial Hospital. The CEO has asked you to analyze two proposed capital investment Project X and project Y each project requires a net investment outlay of $12,000 and the opportunity cost of capital for each project is 14% the project's expected net cash flows are as following Year Project x Project Y 0 (12,000) (12,000) 1 6,600 3,500 2 3,500 3,500 3 3,500 3,500 4 3,500 3,500   Calculate each project’s payback, NPV and IRR.   Which project is financially acceptable? Explain

(d)    State which project you would recommend to Dreamon Corporation if ONE project can be selected (i.e. mutually exclusive). Give reason to support your decision.

Evaluate the following capital project proposals, given a capital budget of $750 million. project: IO (millions) PV(NCF 1-n) (millions)   A 100 120   B 500 625   C 400 490   D 250 290     please show work. I don't understand how to find the NPV   Answer: NPV= 165 million   IO = 750 million

As the director of capital budgeting for UNO Corporation, you are evaluating two mutually exclusive projects with the following net cash flows: Year 0 1 2 3 4 Project L -$100,000 65,000 40,000 30,000 15,000 If UNO's cost of capital is 15 percent, you would choose? Project S should be accepted because it has the higher NPV Project L should be accepted because it has the higher NPV Neither project should be accepted Project L should be accepted because it has the higher ROI Project L should be accepted because it has the higher IRR Project S -$100,000 10,000 35,000 45,000 95,000

Assume that the manager faces a capital budget constraint with respect to total dollars available today to invest in new projects, $46 million. Assume same WACC for each project. All else equal, which project or set of otherwise independent projects should the manager choose?   Project NPV $millions) IRR Required Investment today A $ 10 14.0% $ 22 Hs23Page 2 of 2Please underline final answers.     Section B Section B Hs23Page 2 of 2Please underline final answers.     B $ 9 12.9% $ 23 C $ 11 14.1% $ 23 Use the following information to answer the next threequestionsonly:[see next page for a blank area to do calculations.] The firm gets 100% of its capital from common stock. The equity holder’s required rate of return is 10% and the firm’s tax rate is 0%. The project involves an immediate investment of $13,000 for the purchase and installation of equipment. The equipment will be depreciated…