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1. Alleyne thinks that projects should be selected based on their NPVs. Assume all cash flows occur at the end of the year except for initial investment amounts. Calculate the NPV for each project. Ignore income taxes

1. Alleyne thinks that projects should be selected based on their NPVs. Assume all cash flows occur at the end of the year except for initial investment amounts. Calculate the NPV for each project. Ignore income taxes

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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1. Alleyne thinks that projects should be selected based on their NPVs. Assume all
cash flows occur at the end of the year except for initial investment amounts.
Calculate the NPV for each project. Ignore income taxes

| McGloire Construction is analyzing its capital expenditure proposals for the purchase of equipment in the coming year. The capital budget is limited to $5,000,000 for the year. Lori Alleyne, staff analyst at McGloire's, is preparing an analysis of the three projects under consideration by Joyanne McGloire, the company's owner. A B D Project A Project B Project C 2 Projected cash outflow 3 Net initial investment $3 000 000 $1 500 000 $4 000 000 4 5 Projected cash inflows $ 400 000 $2 000 000 2 000 000 Year 1 $1 000 000 1 000 000 1 000 000 1 000 000 7 Year 2 Year 3 900 000 8 800 000 200 000 9. Year 4 100 000 10 11 Required rate of return 10% 10% 10% 1. Because the company's cash is limited, McGloire thinks the payback method should be used to choose between the capital budgeting projects.
Transcribed Image Text:| McGloire Construction is analyzing its capital expenditure proposals for the purchase of equipment in the coming year. The capital budget is limited to $5,000,000 for the year. Lori Alleyne, staff analyst at McGloire's, is preparing an analysis of the three projects under consideration by Joyanne McGloire, the company's owner. A B D Project A Project B Project C 2 Projected cash outflow 3 Net initial investment $3 000 000 $1 500 000 $4 000 000 4 5 Projected cash inflows $ 400 000 $2 000 000 2 000 000 Year 1 $1 000 000 1 000 000 1 000 000 1 000 000 7 Year 2 Year 3 900 000 8 800 000 200 000 9. Year 4 100 000 10 11 Required rate of return 10% 10% 10% 1. Because the company's cash is limited, McGloire thinks the payback method should be used to choose between the capital budgeting projects.
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