Your company wants to determine the feasibility of two capital budgeting projects, and has given you the task of analyzing them. Becausethe projects are at the early "idea" stage, they are referred to simply as Project A and Project B. Each project has a cost of $50.000. and acost of capital of 12%. Their expected net cash flows are:Expected Net Cash FlowsYearProject A (S)Project B (S)(50.000)(50.000)26,50018,50018.00017.5003.12,00015,50047.00015,500(a) Calculate each project's payback period,(b) Calculate each project's net present value (NPV)(c) Calculate each project's internal rate of return (IRR).(d) Which project(s) should be accepted if they are independent?(e) Which project should be accepted if they are mutually exclusive?

Ans a] Pay back period of each project : Year Project A$ Project B$ 0…

Answered: Your company wants to determine the…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Quantitative Problem: Bellinger Industries is considering two projects for inclusion in its capital budget, and you have been asked to do the analysis. Both projects' after-tax cash flows are shown on the time line below. Depreciation, salvage values, neti operating working capital requirements, and tax effects are all included in these cash flows. Both projects have 4-year lives, and they have risk characteristics similar to the firm's average project. Bellinger's WACC is 8%. 2 3 4 0 1 Project A -1,250 600 Project B -1,250 200 What is Project A's MIRR? Do not round intermediate calculations. Round your answer to two decimal places 96 Show All Feedback 450 385 240 390 290 740 Show All Feedback What is Project B's MIRR? Do not round Intermediate calculations. Round your answer to two decimal places. Chuck M En remaining)
XYZ Corporation is considering a capital budgeting project and requires a detailed analysis. The company has provided youwith the following financial information and ratios:Return on Investment (ROI): 15%Payback Period: 3 yearsNet Present Value (NPV): R50,000Internal Rate of Return (IRR): 12%Cash Flows:Year 1: R20 000Year 2: R30 000Year 3: R40 0001.4 Calculate the ARR for XYZ Corporation. Assume depreciation is calculated on the straight-linemethod and that the project has a scrap value of R5000
Make a CashFlow projection of 10 million rupees investiment in some project ABC for the next 7 years. Recall following topics you have covered in your course: i) Capital Budgeting Techniques ii) Cash flow Estination. Apply all the techniques on your cash flow projections for decision making Assume required rate of return is 15% . Capital Budgeting Techniques: Payback Period. Discounted Payback Period Net Present Value . Internal Rate of Return Modified Internal Rate of Return Average Accounting Return
Consider the following projects, X and Y where the firm can only choose one. Project X costs $1500 and has cash flows of $678, $652, $347, $111, $54, $16 in each of the next 6 years. Project Y also costs $1500, and generates cash flows of $738, $693, $405 for the next 3 years, respectively. WACC=11%.A) Draw the timelines for both projects: X and Y.
Accounting Draw the cash flow diagram for the given project below and then calculate the project net profit. The following table shows the activities description, dependency, duration, and cost elements. Assume the followings: Project overhead 8%. Tax 3%. Bond 1.25%. Profit 6%. Interest rate 9% per year. Down payment 10% with a guarantee letter, which costs 0.25% per month paid to the bank at the project start date. A performance guarantee letter of 10% will be submitted from contractor at the project begin. Invoices are submitted every month and will be paid a month later. Retention 10% and will be paid at the last invoice. Subcontractors: retention 10% will be paid at the last invoice, down payment 20%. Labor: labor expenses to be paid bi-weekly. Equipment: equipment expenses
A proposed project is expected to increase accounts receivable by $25,000, decrease inventory by $8,000 and increase accounts payable by $16,000. What is the project's initial requirement for net working capital? Select one: a. +$17,000 b. $1000 c. -$9,000 d. +$9,000
Phoenix Company is considering investments in projects C1 and C2. Both require an initial investment of $222,000 and would yield the following annual net cash flows. (PV of $1. EV of $1. PVA of $1, and EVA of $1) Note: Use appropriate factor(s) from the tables provided. Net cash flows Year 1 Year 2 Year 3 Totals Project C1 $ 10,000 106,000 166,000 $ 282,000 Project C2 $ 94,000 94,000 94,000 $ 282,000 a. The company requires a 12% return from its investments. Compute net present values using factors from Table B.1 in Appendix B to determine which projects, if any, should be accepted. b. Using the answer from part a, is the internal rate of return higher or lower than 12% for (i) Project C1 and (ii) Project C2? Hint: It is not necessary to compute IRR to answer this question. Complete this question by entering your answers in the tabs below. Required A Required B The company requires a 12% return from its investments. Compute net present values using factors from Table B.1 in Appendix B…
Let's assume that you are working on an independent capital budgeting project which is expected to have the following cash flows: Year Cash Flows 0 -$850,000 1 $300,000 2 $400,000 3 $500,000 What is the project’s net present value (NPV) at an 18% required rate of return? (Round to the nearest whole number.) Will you accept or reject this project?
A company is considering a 10-year capital investment project. The project has annual positive cash flows each year. The accounting manager has calculated the NPV of the same project using three different costs of capital (8%, 10% and 18 %) as discount rates. Select the most logical combination of NPVS from the choices given. Note: You cannot calculate the NPVS nor do you need to. O $(5,743) $3,152 $6,612 O $(5,743) $6,612 $3,152 $3,152 $6,512 $(5,743) O $6,512 $3,152 $(5,743) O None of the above
Suppose a company has the following three projects and limits it capital budget to $50,000. Projects Present Value of Cash Inflows Initial Investment A $40,000 $25,000 B 37,500 25,000 70,000 50,000 1. Calculate the projects' NPVs. 2. Calculate the projects' PIs. 3. Which project(s) should the company choose? Why?
A project will require an initial outlay of $2000 and will result in the following cash inflows in the years shown. If the cost of capital is 3%, what is the NPV of the project? a. $321 Ob. $388 O c. $318 O d. $460 Year 2 Cash Flow $770 $880 $810
Financial Manager of Timmy Company is considering two projects (project A and project H), which have cash flows as follows: Year Cash Flow of Project A (in $) Cash Flow of Project H (in $) 0 -100 -100 1 10 70 2 60 50 3 80 20 Timmy Company’s cost of capital is 10 percent. Calculate payback, NPV, IRR, and MIRR for both projects. (Please have a step by step format to your answer with explainations. Thanks (=)

Recommended textbooks for you

FINANCIAL ACCOUNTING

Accounting

ISBN:

9781259964947

Author:

Libby

Publisher:

MCG

Accounting

ISBN:

9781337272094

Author:

WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.

Publisher:

Cengage Learning,

Accounting Information Systems

Accounting

ISBN:

9781337619202

Author:

Hall, James A.

Publisher:

Cengage Learning,

FINANCIAL ACCOUNTING

Accounting

ISBN:

9781259964947

Author:

Libby

Publisher:

MCG

Accounting

ISBN:

9781337272094

Author:

WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.

Publisher:

Cengage Learning,

Accounting Information Systems

Accounting

ISBN:

9781337619202

Author:

Hall, James A.

Publisher:

Cengage Learning,

Horngren's Cost Accounting: A Managerial Emphasis…

Accounting

ISBN:

9780134475585

Author:

Srikant M. Datar, Madhav V. Rajan

Publisher:

PEARSON

Intermediate Accounting

Accounting

ISBN:

9781259722660

Author:

J. David Spiceland, Mark W. Nelson, Wayne M Thomas

Publisher:

McGraw-Hill Education

Financial and Managerial Accounting

Accounting

ISBN:

9781259726705

Author:

John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS