1) Payback Period Technique. 2) Discounted Payback Period Technique. 3) Net Present Value Technique
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Salalah company management is considering two competing investment Projects A and B.
Year
Initial Investment
1
2
3
4
5
Project A 8000 2750 2750 2750 2750 2750
Project B 8000 3000 3000 3000 3000 3000
DISCOUNT RATE 5.05%
Q1) Use the information below and help the management in choosing the most desirable Project using all the following techniques:
1) Payback Period Technique.
2) Discounted Payback Period Technique.
3)
4) Profitability Index Technique.
Q2) Based on your solution or answer to question 1, comment as to which proposal is better and why?
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- Refer to the table below to answer the following question. Project Initial Investment NPV IP 200 22 Q 180 26 IR 185 38 IS 380 10 The project with highest Profitability Index is Project P Project Q Project R Project SI'm working through a practice assignment with an answer key and I'm getting Answer A for question 4 but the answer key for this one says the answer is C. Can someone work through this one and show me how its done please? For questions 3-4, consider the following table. Investment Investment cost at i = 0 Revenue at t = 1 Revenue at t= 3. 180 200 -200 50 -300 149 Table 1 Suppose that you need to choose between two investment options A and B. Given that the persistent anmual interest rate is 5 percent, which investment option would yiel a higher value? (a) Option A. (b) Option B. (c) Both options would yield the same value. (d) Not enough information.. Suppose that your organization wants to decide which one of the given two projects can be selected for the development, as summarized in the following table. Calculate the Expected Monetary Value (EMV) for each project and suggest which project can be selected? Probability of occurrence of risk/opportunity (Impact) Estimated Profits/Losses Project 1 40% $140000 60% -$60000 Project 2 80% $40000 20% -$8000
- Salalah company management is considering two competing investment Projects A and B.YearInitial Investment 12345Project A 8000 2750 2750 2750 2750 2750Project B 8000 3000 3000 3000 3000 3000DISCOUNT RATE 5.05%Q1) Use the information below and help the management in choosing the most desirable Project using all the following techniques:1) Payback Period Technique.2) Discounted Payback Period Technique.3) Net Present Value Technique4) Profitability Index Technique. Q2) Based on your solution or answer to question 1, comment as to which proposal is better and why?Refer to the table below to answer the following question. Project Initial Investment NPV P 200 22 Q 180 26 R 185 38 S 380 10 The project with highest Profitability Index is Project P Project Q Project R Project SConsider the following two projects: Project Year 0 Year 1 Year 2 Year 3 Year 4 Discount Cash Flow Cash Flow Cash Flow Cash Flow Cash Flow Rate A - 100 40 50 60 N/A 0.18 B - 73 30 30 30 30 0.18 Assume that projects A and B are mutually exclusive. The correct investment decision and the best rationale for that decision is to A. invest in project B, since NPV, > NPV, A B. invest in project A, since NPV, > 0. OC. invest in project A, since NPV, IRR, A'
- You are evaluating five investment projects. You already calculated the rate of return for each alternative investment and incremental rate of return between the two alternatives as well. In calculating the incremental rate of return, a lower cost investment project is subtracted from the higher cost investment project. All rate of return figures are rounded to the nearest integers. Investment Alternative Initial Investment ($) Rate of Return (%) Rate of Return on Incremental Investment (%) A CDE A B C D E b.Select E. c. Select B. 35,000 45,000 d. Do nothing. 50,000 65,000 80,000 12 15 13 20 18 B 28 20 36 27 12 40 22 If all investment alternatives are mutually exclusive and the MARR is 12%, which alternative should be chosen? a. Select D. 42 25 -5Compute the Profitability Index (PI) for each project? Project A Project B Profitability Index (PI) 5- In light of your answers above, suppose that these two projects might be mutually exclusive or independent. According to these two assumptions, fill in the blanks in the table below with the suitable answer: Points Investment Criteria If A and B are mutually exclusive, then I would select If A and B are independent, then I would select PBP NPV IRR PICarter Company is considering three investment opportunities with the following accounting rates of return: Project Y Project X 13.25% Project Z 10.47% ARR 6.58% Use the decision rule for ARR to rank the projects from most desirable to least desirable. Carter Company's required rate of return is 8%. (1 = most desriable and 3= least desirable. Select whether each project should be accepted or rejected.) C Rank Accept/Reject Project X Project Y Project Z @ # * $ IOL 4 % 2 6 4 & 7 4 8 ( 9 ➤W O
- Use the information provided to answer the questions.Use the information provided below to calculate the following. Where applicable, use the presentvalue tables provided in APPENDICES 1 and 2 that appear after QUESTION 5. 5.1.3 Calculate the Net Present Value of each project (with amounts rounded off to the nearest Rand). 5.1.4 Use your answers from question 5.1.3 to recommend the project that should be chosen. Motivateyour choice. INFORMATION Zeda Enterprises has the option to invest in machinery in projects A and B but finance is only available to invest inone of them. You are given the following projected data:Project A Project BInitial cost R300 000 R300 000Scrap value R40 000 0Depreciation per year R52 000 R60 000Net profitYear 1 R20 000Year 2 R30 000Year 3 R50 000Year 4 R60 000Year 5 R10 000Net cash flowsYear 1 R90 000Year 2 R90 000Year 3 R90 000Year 4 R90 000Year 5 R90 000 Additional informationThe discount rate used by the company is 12%.Whispering Winds Company is considering a long-term investment project called ZIP. ZIP will require an investment of $130,000. It will have a useful life of four years and no salvage value. Annual cash inflows would increase by $81,000, and annual cash outflows would increase by $40,500. In addition, the company's required rate of return is 10% Click here to view the factor table (a) Calculate the net present value on this project. (If the answer is negative, use either a negative sign preceding the number eg-5,275 or parentheses es. (5,275), For calculation purposes, use 5 decimal places as displayed in the factor table provided, eg. 1.25124 and final answer to O decimal places, eg. 5,275) Net present value $ Identify whether the project should be accepted or rejected. The project should be (b) Q Search 458 PMA firm has two potential investment projects. The project information is summarised in the table below. Project A $670 Project B $700 Expected value of profit Standard deviation of profit Coefficient of variation of profit 175 370 0.26 0.53 Which project has a lower absolute risk level? Which project has a lower relative risk level? Which project would you advise the firm to choose? Explain your answers. ---- --- ---- ..- ---