All techniques: Decision among mutually exclusive investments Pound Industries is attempting to select the best of three mutually exclusive projects. The initial investment and subsequent cash inflowsassociated with these projects are shown in the following table.Cash flowsProject A$30,000$10,000Project BProject CInitial investment (CF)$60,000$21,500$70,000$22,500Cash inflows (CF), t= 1 to 5a. Calculate the payback period for each project.The NPv of projeci C is 017.10|. (Rouna to tne nearesi cEnt.)c. The IRR of project A is%. (Round to two decimal places.)The IRR of project B is %. (Round to two decimal places.)The IRR of project C is%. (Round to two decimal places.)d. Which project would you recommend? (Select the best answer below.)O A. Project COB. Project BOC. Project A

To Find:- Payback period IRR Which project to select

Answered: All techniques: Decision among mutually…

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

See similar textbooks

Similar questions

Consider two investments A and B with the following sequences of cash flows: Net Cash Flow n Project A Project B 0 -$120,000 -$100,000 1 20,000 15,000 2 20,000 15,000 3 120,000 130,000 (a) Compute the IRR for each investment. (b) At MARR = 15%, determine the acceptability of each project. (c) If A and B are mutually exclusive projects, which project would you select, based on the rate of return on incremental investment?
The following are the cash flows of two projects: Year Project A Project B -$200 -$200 01234 Project A B If the opportunity cost of capital is 11%, what is the profitability index for each project? (Do not round intermediate calculations. Round your answers to 4 decimal places.) Profitability index 80 80 80 80 00 100 100 100 Is the project with the highest profitability index also the one with the highest NPV? Yes No
Subject: acounting
Carmen, Inc. is considering three different independent investment opportunities. The present value of future cash flows, initial investment, net present value, and profitability index for each of the projects are as follows: Project A Project B Project C Present value of future cash flows $450,100 $313,100 $405,000 Initial investment 200,000 155,000 190, еее Net present value $250, 100 $158,100 $215,000 Profitability index 2.25 2.02 2.13 In what order should Carmen prioritize investment in the projects? Multiple Cholce С, В, А O A, B, C А, С, В C, A, B
Attend all part
1
A techniques-Decision among mutually exclusive investments Pound Industries is attempting to select the best of three mutually exclusive projects. The initial investment and after-tax cash inflows associated with these projects are shown in the following table. Cash flows Initial investment (CF) Project A $60,000 Project B $100,000 Project C $90,000 Cash inflows (CF), t=1 to 5 $20,000 $31,500 $32,000 a. Calculate the payback period for each project. b. Calculate the net present value (NPV) of each project, assuming that the firm has a cost of capital equal to 12%. c. Calculate the internal rate of return (IRR) for each project. d. Indicate which project you would recommend. a. The payback period of project A is years. (Round to two decimal places.) % [7%
Case 1: Assume you are evaluating two mutually exclusive projects,the cash flows of which appear below, and that your company uses a cost of capital of 8 percent to evaluate projects such as these. Time Project A Cash Flow Project B Cash Flow 0 -$650 -$700 1 100 300 2 250 -200 3 250 550 4 200 200 5 100 80 a. Calculate the payback of Project A. b. Calculate the discounted payback of Project A. c. Calculate the IRR of Project A. d. Using the NPV method and assuming a cost of capital of 8 percent, which of these projects should be accepted?
Consider the following investment projects: Assume that MARR = 15%. (a) Compute the IRR for each project. (b) If the three projects are mutually exclusive investments, which project should be selected according to the IRR criterion?
Porter Company is analyzing two potential Investments. Project X $ 97,090 Initial investment Net cash flow: Year 1 Year 2 Year 3 Year 4 Multiple Choice If the company is using the payback period method, and it requires a payback of three years or less, which project(s) should be selected? O 32,500 32,500 32,500 0 Both X and Y are acceptable projects. O Project Y. Project Y $ 77,000 Project Y because it has a lower Initial Investment. Project X 5,700 34,500 34,500 25,000 Neither X nor Y is an acceptable project.
Annual cash inflows that will arise from two competing investment projects are given below: Year Investment A Investment B 1 $7,000 $ 10,000 2 8,000 3 9,000 4 10,000 $ 34,000 9,000 8,000 7,000 $ 34,000 The discount rate is 7%. Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using tables. Required: Compute the present value of the cash inflows for each investment.
Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 -$ 243,567 -$ 15,530 1 27,200 55,000 60,000 413,000 234 5,173 8,261 13,237 8,729 Whichever project you choose, if any, you require a 6 percent return on your investment. a. What is the payback period for Project A? Payback period

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS