123You are asked to evaluate the following two projects for the Norton corporation. Use a discount rate of 13 percent. Use Appendix B foran approximate answer but calculate your final answer using the formula and financial calculator methods.Project X (Videotapes ofthe Weather Report)($18,000 Investment)Cash FlowYearProject Y (Slow-MotionReplays of Commercials)($38,000 Investment)Cash FlowYear$ 9,00017,0008,000237,6004$19,00012,00013,00015,0004a. Calculate the profitability index for project X.Note: Do not round intermediate calculations and round your answer to 2 decimal places.Profitability indexb. Calculate the profitability index for project Y.Note: Do not round intermediate calculations and round your answer to 2 decimal places.Profitability index

- Profitability index measures the ratio between the present value of future cash flows and the…

Answered: 123 You are asked to evaluate the…

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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You are asked to evaluate the following two projects for the Norton corporation. Use a discount rate of 14 percent. Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods. Project X (Videotapesof the Weather Report)($20,000 Investment) Project Y (Slow-MotionReplays of Commercials)($40,000 Investment) Year Cash Flow Year Cash Flow 1 $ 10,000 1 $ 20,000 2 8,000 2 13,000 3 9,000 3 14,000 4 8,600 4 16,000 a. Calculate the profitability index for project X. b. Calculate the profitability index for project Y.
K Mc Graw Hill You are asked to evaluate the following two projects for the Norton corporation. Use a discount rate of 13 percent. Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods. Project X (Videotapes of the Weather Report) ($18,000 Investment) Year Cash Flow 1 $ 9,000 2 7,000 8,000 7,600 3 4 Profitability index Project Y (Slow-Motion Replays of Commercials) ($38,000 Investment) Cash Flow $ 19,000 12,000 13,000 15,000 a. Calculate the profitability index for project X. Note: Do not round intermediate calculations and round your answer to 2 decimal places. Year 1 2 3 4 Profitability index b. Calculate the profitability index for project Y. Note: Do not round intermediate calculations and round your answer to 2 decimal places. c. Which project would you select based on the profitability index? O Project X Project Y Project Y
You are asked to evaluate the following two projects for the Norton Corporation. Using the net present value method combined with the profitability index approach described in footnote 2 of this chapter, which project would you select? Use a discount rate of 14 percent. Project X (videotapes of the weather report) ($20,000 investment) Year Cash Flow 1. $10,000 2 8,000 3 9.000 4 8.600 Project X (videotapes of the weather report) ($40,000 investment) Year Cash Flow $20,000 2 13,000 3 14.000 4 16.800
X-treme Vitamin Company is considering two Investments, both of which cost $14,000. The cash flows are as follows: Tear Project A Project B $16,000 $14,000 5,000 9,000 2 3 6.000 4,000 Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods. a-1. Calculate the payback period for Project A and Project B. (Round your answers to 2 decimal places.) Project A Project B Payback Period year(s) year(s) a-2. Which of the two projects should be chosen based on the payback method? O Project A O Project B b-1. Calculate the net present value for Project A and Project B. Assume a cost of capital of 8 percent. (Do not round intermediate calculations and round your final answers to 2 decimal places.) Project A Project B Net Present Value
X-treme Vitamin Company is considering two investments, both of which cost $20,000. The cash flows are as follows: Year Project A Project B 1 $ 23,000 $ 20,000 2 10,000 9,000 3 10,000 15,000 Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods. a-1. Calculate the payback period for Project A and Project B. (Round your answers to 2 decimal places.) project A 0.87 years project B 1 year b-1. Calculate the net present value for Project A and Project B. Assume a cost of capital of 8 percent. (Do not round intermediate calculations and round your final answers to 2 decimal places.)
X-treme Vitamin Company is considering two investments, both of which cost $10,000. The cash flows are as follows: NOTE: you must show your work for ALL steps for full credit. Year Proj A Proj B 1 $ 12,000.00 $10,000.00 2 $8,000.00 $6,000.00 3 $ 6,000.00 $16,000.00 a. Which of the two projects should be chosen based on the payback method b. Which of the two projects should be chosen based on the net present value method? Assume a cost of capital of 10 percent. c. Should a firm normally have more confidence in answer a or answer b.
X-treme Vitamin Company is considering two investments, both of which cost $34,000. The cash flows are as follows: $ 36,000 Project B $ 34,000 16,000 18,000 16,000 10,000 Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods. a-1. Calculate the payback period for Project A and Project B. Note: Round your answers to 2 decimal places. Year Project A 1 2 3 Project A Project B a-2. Which of the two projects should be chosen based on the payback method? Project A O Project B Payback Period year(s) year(s) b-1. Calculate the net present value for Project A and Project B. Assume a cost of capital of 12 percent. Note: Do not round intermediate calculations and round your final answers to 2 decimal places. Project A Project B Net Present Value
X-treme Vitamin Company is considering two investments, both of which cost $10,000. The cash flows are as follows: Year Project A Project B 1 $ 12,000 $ 10,000 2 8,000 6,000 3 6,000 16,000 Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods. a-1. Calculate the payback period for Project A and Project B. b-1. Calculate the net present value for Project A and Project B. Assume a cost of capital of 10 percent.
Calculate the NPV of each project. (Use the NPV function in Excel to solve this problem.) Which of the two projects would you fund if the decision is based only on financial information and you could only choose one of the projects? Omega Alpha Year Inflow YO 0 Y1 0 Outflow 207,000 110,000 Netflow Year Inflow Outflow Netflow (207,000) YO 0 217,000 (217,000) (110,000) Y1 7,000 190,000 (183,000) Y2 150,000 0 150,000 Y2 150,000 0 150,000 Y3 220,000 30,000 190,000 Y3 220,000 30,000 190,000 Y4 161,000 0 161,000 Y4 191,000 0 191,000 Y5 205,000 48,000 157,000 Y5 205,000 38,000 167,000 Y6 197,000 0 197,000 Y6 197,000 0 197,000 Y7 100,000 30,000 70,000 Y7 100,000 30,000 70,000 Total 1,033,000 425,000 608,000 Total 1,070,000 505,000 565,000 The NPV for Omega is The NPV for Alpha is The better project is
You work for an outdoor play structure manufacturing company and are trying to decide between the following two projects: (Click on the following icon in order to copy its contents into a spreadsheet.) Project Playhouse Fort Year-End Cash Flows ($ thousands) 1 0 - 26 - 76 19 40 The incremental IRR is %. (Round to two decimal places.) 2 19 52 IRR 29.5% 13.1% You can undertake only one project. If your cost of capital is 5%, use the incremental IRR rule to make the correct decision.
Below are four cases that you will have to solve using Excel spreadsheets. 1st case The company COMERCIAL SA has two investment alternatives that present the following information: PROJECT A B It is requested Initial investment. $25,000 $22,000 Cash flows year 1 1. Determine the internal rate of return. 2. Determine the present value. $7,000 $12,000 The discount rate for the project will be 10% and the MARR will be 20%. 3. Determine the recovery period. 4. Define which is the most viable project. Year 2 cash flows $15,000 $8,000 Year 3 cash flows $18,000 $12,000
Duo Corporation is evaluating a project with the following cash flows: Year Cash Flow -$ 29,800 012345 12,000 14,700 16,600 13,700 -10,200 The company uses a discount rate of 13 percent and a reinvestment rate of 6 percent on all of its projects. a. Calculate the MIRR of the project using the discounting approach. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. Calculate the MIRR of the project using the reinvestment approach. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) c. Calculate the MIRR of the project using the combination approach. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a. Discounting approach MIRR b. Reinvestment approach MIRR c. Combination approach MIRR % % %

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