1. Murdoch Pty Ltd is considering three mutually exclusive projects. The initial cash outflow and after-tax cash inflows associated with each project are show in the following table: Cash Flows Initial Cash Outflow Cash Inflows Years 1-5 Project X ($) Project Y ($) Project Z ($) 50,000 100,000 115,000 27,000 41,000 43,000 A) Calculate the payback period for each period B) Calculate the NPV of each project assuming, that the company has a cost of capital equal to 13%

1. Murdoch Pty Ltd is considering three mutually exclusive projects. The initial cash outflow and after-tax cash inflows associated with each project are show in the following table: Cash Flows Initial Cash Outflow Cash Inflows Years 1-5 Project X ($) Project Y ($) Project Z ($) 50,000 100,000 115,000 27,000 41,000 43,000 A) Calculate the payback period for each period B) Calculate the NPV of each project assuming, that the company has a cost of capital equal to 13%

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

Problem 1PS

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The following are the cash flows of two independent projects: Year Project A Project B 0 $ (270 ) $ (270 ) 1 150 170 2 150 170 3 150 170 4 150 a. If the opportunity cost of capital is 12%, calculate the NPV for both projects. (Do not round intermediate calculations. Round your answers to 2 decimal places.)
Consider the following projects: Cash Flows ($) Co -10,000 -20,000 Project D E Assume that the projects are mutually exclusive and that the opportunity cost of capital is 10%. a. Calculate the profitability index for each project. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Project D E Profitability Index C1 20,000 35,000 b-1. Calculate the profitability-index using the incremental cash flows. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Profitability-index
Duo Corporation is evaluating a project with the following cash flows: Year Cash Flow 0 −$ 16,800 1 7,900 2 9,100 3 8,700 4 7,500 5 −4,900 The company uses an interest rate of 9 percent on all of its projects. Calculate the MIRR of the project using all three methods. Note: Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.
Consider two mutually exclusive projects, A and B, whose costs and cash flows are shown in the following table: Year Project A Project B 1 $(15,000) $(22,840) 2 9,000 8,000 3 8,000 8,000 4 2,500 8,000 5 3,000 8,000 Calculate the cross over rate. Please use equations not just excel
Compute the internal rate of return for the cash flows of the following two projects. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) Year Project A 0 -$13,800 Project B -$ 11,400 1 5,400 2,900 2 6,200 8,500 3 5,000 4,600 Project A Project B % %
Consider the following two mutually exclusive projects: Year Cash Flow (X) Cash Flow (Y) 0 -$ 15,900 -$ 15,900 1 6,710 7,290 2 7,290 7,730 3 4,810 3,630 a. What is the IRR of Project X? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decim b. What is the IRR of Project Y? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decim c. What is the crossover rate for these two projects? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decim a. IRR b. IRR % % c. Crossover rate %
(IRR calculation) Determine the IRR on the following projects: a. An initial outlay of $13,000 resulting in a single free cash flow of $17,207 after 7 years b. An initial outlay of $13,000 resulting in a single free cash flow of $47,031 after 14 years c. An initial outlay of $13,000 resulting in a single free cash flow of $110,851 after 23 years d. An initial outlay of $13,000 resulting in a single free cash flow of $13,624 after 4 years a. What is the IRR of a project with an initial outlay of $13,000 resulting in a single free cash flow of $17,207 after 7 years? % (Round to two decimal places.)
Here are the expected cash flows for three projects: Cash Flows (dollars) Year 2 Project A C Year 8 -6,588 -2,580 -6,500 Year 1 +1,375 +1,375 +2,588 +1,375 +1,375 Year 3 +3,758 +2,758 +3,750 Year 4 8 +3,750 +5,758 a. What is the payback period on each of the projects? b. If you use the payback rule with a cutoff period of 2 years, which projects will you accept? c. If you use a cutoff period of 3 years, which projects will you accept? d-1. If the opportunity cost of capital is 12%, calculate the NPV for projects A, B, and C. Note: Negative amounts should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to 2 decimal places. d-2. Which projects have positive NPVs? e. "Payback gives too much weight to cash flows that occur after the cutoff date." True or false? a. Payback period b. If you use the payback rule with a cutoff period of 2 years, which projects will you accept? c. If you use a cutoff period of 3 years, which projects will you accept?…
Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 (434,000) (44,500) 1 $39,500 $21,300 2 $66,500 $12,400 3 $83,500 $23,100 4 $549,000 $19,900 The re quired return on these investments is 11 percent. a. What is the payback period for each project? Note: Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. b. What is the NPV for each project? Note: Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. c. What is the IRR for each project? Note: Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16. d. What is the profitability index for each project? Note: Do not round intermediate calculations and round your answers to 3 decimal places, e.g., 32.161. e. Based on your answers in (a) through (d), which project will you finally choose?
(IRR calculation) Determine the IRR on the following projects: a. An initial outlay of $11,000 resulting in a single free cash flow of $16,992 after 9 years b. An initial outlay of $11,000 resulting in a single free cash flow of $53,871 after 14 years c. An initial outlay of $11,000 resulting in a single free cash flow of $110,943 after 24 years d. An initial outlay of $11,000 resulting in a single free cash flow of $13,692 after 5 years a. What is the IRR of a project with an initial outlay of $11,000 resulting in a single free cash flow of $16,992 after 9 years? % (Round to two decimal places.)
(Mutually exclusive projects and NPV) You have been assigned the task of evaluating two mutually exclusive projects with the following projected cash flows: Year ܘ ܝ 1 2 1345 Project A Cash Flow $(95,000) 35,000 35,000 35,000 35,000 35,000 Project B Cash Flow $(95,000) The NPV of Project A is $ 0 0 0 0 230,000 (Click on the icon in order to copy its contents into a spreadsheet.) If the appropriate discount rate on these projects is 9 percent, which would be chosen and why (Round to the nearest cent.)

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