Excel AssessmentA company is considering three mutually exclusive projects for its expansion plans. The initialinvestment in the project is OMR 400000. The finance director thinks that the project with thehigher NPV should be chosen, whereas the managing director believes that the higher IRR shouldbe undertaken, especially as projects have the same initial outlay and length of life. The companyanticipates a cost of capital of 10.5%, and the net after-tax cash flows of the projects are asfollows:YearCash Flow ACash Flow BCash Flow C1700004360009000016000020000149000180000200005120041500008000100000540000600049400(All amounts are in OMR)Required:(b) Which project will you advise to undertake to the company? Explain your answer(c) What deficiencies in IRR can be overcome by using MIRR?2.

Given information : Year Cash flow A Cash flow B Cash flow C 0 -400000 -400000 -400000 1…

A company is considering three mutually exclusive projects for its expansion nvestment in the project is OMR 400000. The finance director thinks that the nigher NPV should be chosen, whereas the managing director believes that the be undertaken, especially as projects have the same initial outlay and length of I anticipates a cost of capital of 10.5%, and the net after-tax cash flows of th Follows:

A company is considering three mutually exclusive projects for its expansion nvestment in the project is OMR 400000. The finance director thinks that the nigher NPV should be chosen, whereas the managing director believes that the be undertaken, especially as projects have the same initial outlay and length of I anticipates a cost of capital of 10.5%, and the net after-tax cash flows of th Follows:

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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Advance Inc. is considering investing £10 million on a project. It is expected that the project willgenerate annual cash inflows of 1.5 million in perpetuity. The corporate’s opportunity cost of capitalfor this project is 12%.a) Demonstrate the net present value (NPV) approach to evaluate whether to invest in thisproject.b) Demonstrate the internal rate of return (IRR) approach to evaluate whether to invest in thisproject.c) Which approach should be adopted when NPV and IRR generates conflicting results, andwhy?
ZLIK Inc is considering methods by which to evaluate a multi-year project that requires a large $55 million investment. Assuming the project has conventional cash flows, under which conditions would the project be an acceptable investment for ZLIK? Select all that apply. A) NPV < 0 B) NPV > 0 C) IRR > firm's required return D) IRR < firm's required return E) Profitability Index > 1.0 F) Profitability Index < 1.0
Cenderawasih Holdings is evaluating two (2) mutually exclusive projects that require an initial investment of RM50,000. The cash flows for each project are give as follows: Year Project Delima Projek Nilam RM10,000 RM15,000 2. RM20,000 RM15,000 RM26,000 RM15,000 RM25,000 RM15,000 5. RM15,000 RM15,000 Assume the cost of capital is 16 percent. Compute the Net Present Value (NPV) for each investment. 3.
Kabul Storage is considering a project that has the following cash flow data. What is the project's IRR? If the company’s cost of capital is 12% should the project be accepted? Explain. Year 0 1 2 3 Cash flows -$1,100 $450 $470 $490
Seagated Corp Sdn Bhd is considering two projects of machinery that perform the same task. The required rate of return for these projects is RM10%. The projects’ expected cash flows are as follows: Year Machine A (RM) Machine B (RM) 0 (17,000) (17,000) 1 8,000 2,000 2 7,000 5,000 3 5,000 9,000 4 3,000 9,500 Based on the above information, you are required to make an analysis for the decision of Capital Budgeting based on the following techniques: 1) Net Present Value, NPV 2) Profitability Index, PI
Explain how did it get the after-tax cash flow, NPV, EVA, and MVA
Ryan Corporation is considering three investment projects: X, Y, and Z. Project X would require an investment of $20,000, Project Y of $69,000, and Project Z of $83,000. No other cash outflows would be involved. The present value of the cash inflows would be $23,200 for Project X, $77,970 for Project Y, and $94,620 for Project Z. Rank the projects according to the profitability index from most profitable to least profitable. (Ignore income taxes.) (A) Z, X, Y B) X,Z,Y C) Y, X, Z D) Z, Y, X
XYZ Corporation: The data shown in the above table are for two mutually exclusive security projects that a company, called XYZ, is considering. Both projects are assumed to be strategically important to the company. Assume further the company’s cost of capital is 10%. year project A Project B 0 -200 -150 1 200 50 2 800 100 3 -800 150 Calculate the NPV of both projects. Calculate the Profitability Index for both projects. Calculate the IRR for both projects Which security project should XYZ invest in?
Two competing project proposals, 1 and 2, are currently under consideration for the manufacture of a new product line. Information for each of the projects is as follows, with cash flows stated in nominal terms: Project Estimated life 1 2 3 years $200 000 5 years $600 000 Initial outlay Annual after-tax cash flows $175 000 $245 000 1.1 Assume that projects 1 and 2 are of average risk to the firm, and the firm's cost of capital is 5.5% p.a., stated in real terms. If inflation is expected to be 4.25% p.a. for each of the next five years, calculate the net present value of each project. Round your answer off to the nearest dollar. 1.2 Which of the two projects you will select to implement? Motivate your answer.
Walmart is considering two mutually exclusive projects. The firm, which has a 12% cost of capital, has estimated its cash flows as shown in the following table. a) Calculate the NPV of each project, and assess its acceptability. b). Calculate the IRR for each project, and assess its acceptability.
A firm evaluates all of its projects by applying the IRR rule. A project under consideration has the following cash flows: Year 0 Cash Flow -$ 27,800 1 11,800 -23 3 14,800 10,800 If the required return is 18 percent, what is the IRR for this project? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) IRR %
The Star company, is considering two mutually exclusive projects. The expected cash flow values for each project are as follows: Period 0 1 2 3 4 Project A ($2.000.000) 900.000 600.000 500.000 800.000 Project B ($2.000.000) 700.000 700.000 700.000 700.000 With the required rate of return for these projects at 15%, calculate: a. Payback Period (PB), Net Present Value (NPV) and Internal Rate of Return (IRR) for both projects. b. Which project would you choose? Describe your answer

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