A company is considering three alternative investment projects with different net cash flows. Thepresent value of net cash flows is calculated using Excel and the results follow.Potential ProjectsPresent value of net cash flows (excluding initial investment)Initial investmentProject A$ 11,226(10,000)Project B$ 10,568(10,000)a. Compute the net present value of each project.b. If the company accepts all positive net present value projects, which of these will it accept?c. If the company can choose only one project, which will it choose on the basis of net present value?Complete this question by entering your answers in the tabs below.Required ARequired BRequired CCompute the net present value of each project.Potential ProjectsProject AProject BProject CPresent value of net cash flowsInitial investmentNet present value$$$

Net present value = - Initial outlay + Present value of future cash flows. Net present value is…

Answered: a. Compute the net present value of…

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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Doug's Custom Construction Company is considering three new projects, each requiring an equipment investment of $23,100. Each project will last for 3 years and produce the following net annual cash flows. Year 1 (a) 2 3 AA AA BB CC 9,450 Total $29,400 $31,500 BB $7,350 $10,500 $13,650 12,600 (b) 10,500 10,500 The equipment's salvage value is zero, and Doug uses straight-line depreciation. Doug will not accept any project with a cash payback period over 2 years. Doug's required rate of return is 12%. Click here to view the factor table. CC Compute each project's payback period. (Round answers to 2 decimal places, e.g. 15.25.) Which is the most desirable project? 12,600 Which is the least desirable project? 11,550 $37,800 years years The most desirable project based on payback period is years The least desirable project based on payback period is Compute the net present value of each project. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or…
When does the project reach the payback point?
Investment projects can be evaluated using static or dynamic methods. Dynamic valuation methods include Net Present Value (NPV), Internal Rate of Return (IRR), and Payback Time. If we must choose one of the 3 investment evaluation methods. What is the best method or the one that provides us with the most information for making decisions and why?
A firm would accept a project with a net present value of zero because Select one: a. the return on the project would be zero. b. the return on the project would be positive. c. the project would enhance the wealth of the firm's owners. d. the project would maintain the wealth of the firm's owners.
What is the criteria to accept a project based on the net present value and the internal rate of return?
1. State the criterion for accepting or rejecting independent projects under each of the following methods. - Profitability index - Discounted payback period - Accounting rate of return - Net present value - Payback period - Internal rate of return
When two mutually exclusive projects are being compared, explain why the short-term project might be ranged higher under the NVP criterion if the cost of the capital is high, whereas the long-term project might be deemed better if the cost of capital is low. Would changes in the cost of capital ever cause a change in the IRR ranking of two such projects? Why or why not?
The internal rate of return (IRR) is the: Multiple Choice discount rate that results in a zero net present value for the project. discount rate that causes a project's aftertax income to equal zero.
In calculating the Net Present Value, the project would be acceptable if the outcome was: Group of answer choices Positive Positive or Zero Zero Negative
The net present value (NPV) method estimates how much a potential project will contribute to Business ethics/Shareholders Wealth/Employee Benefits, and it is the best selection criterion. The Smaller/Larger the NPV, the more value the project adds; and added value means a Higher/Larger stock price. In equation form, the NPV is defined as: CFt is the expected net cash flow at Time t, r is the project's risk-adjusted cost of capital, N is its life, and cash outflows are treated as negative cash flows. The NPV calculation assumes that cash inflows can be reinvested at the project's risk-adjusted RD/RS/WACC. When the firm is considering independent projects, if the project's NPV exceeds zero the firm should Accept/Reject the project. When the firm is considering mutually exclusive projects, the firm should accept the project with the Lowest Positive/Lowest Negative/Highest Postive/ Highest Negative NPV.Quantitative Problem: Bellinger Industries is considering two projects for inclusion…
How can I answer questions 1-2 and How can I explain if this a good project for the business to accept and why
Which of the following statements is CORRECT? a. If a project with normal cash flows has an IRR greater than the cost of capital, the project must also have a positive NPV. b. If a project with normal cash flows has an IRR less than the cost of capital, the project must have a positive NPV. c. If the NPV is negative, the IRR must also be negative. d. A project's MIRR can never exceed its IRR. e. If Project A's IRR exceeds Project B's, then A must have the higher NPV.

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a. Compute the net present value of each project. b. If the company accepts all positive net present value projects, which of these will it accept? c. If the company can choose only one project, which will it choose on the basis of net present value?