thapter 4 QuizSaved1An engineer at Suncore Micro, LLC calculated the present worth of mutually exclusive bundles, each composed of one or mereindependent projects. Select the acceptable bundle if the capital investment limit is $50,000 and the MARR is 15% per year.Project BundleInitial InvestmentPW, $1-27,00024002.-33,00092003.-44,000730000:29-464-51,00011,400-66,00010,800HIESelect bundle (Click to select) v

Mutually exclusive projects are those projects which are mutually connected with each other means by…

Answered: An engineer at Suncore Micro, LLC…

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Chapter11: The Cost Of Capital

Section: Chapter Questions

Problem 19PROB

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Whispering Inc. now has the following two projects available: Project Initial CF After-tax CF1 After-tax CF2 1 2 PMT1 PMT2 $ $ -11,634.42 Project 1 -3,290.48 5,300 3,800 Assume that RF = 5.1 percent, risk premium = 10.6 percent, and beta = 1.2. Use the EANPV approach to determine which project Whispering Inc. should choose if they are mutually exclusive. (Round cost of capital and final answers to 2 decimal places, e.g.17.35% or 2,513.25.) 1673.12 1479.74 6,200 should be chosen. 3,200 After-tax CF3 9,600
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Q2: Three mutually exclusive alternative public-works projects are currently under consideration. Their respective costs and benefits are included in the table below. Each of the projects has a useful life of 50 years, and MARR is 10% per year. Calculate which, if any, of these projects should be selected? Solve by hand. A В C Capital investment $8,500,000 $10,000,000 $12,000,000 Annual operating and 750,000 725,000 700,000 maintenance costs Market value 1,250,000 1,750,000 2,000,000 Annual benefit 2,150,000 2,265,000 2,500,000
4
.5ו Comparing Investment Criteria. onsiuer uie 1onOwing two inutuany exclusive projects: Cash Flow (B) 1TT Year Cash Flow (A) S415,000 -$3,500 49,000 1,920 57.000 1,390 74,000 1,420 530,000 1,050 4 Whichever project you choose, if any, you require a 13 percent return on your investment. a. If you apply the payback criterion, which investment will you choose? Why? b. If you apply the NPV criterion, which investment will you choose? Why? 8If you apply the IRR criterion, which investment will you choose? Why2 d. If you apply the profitability index criterion, which investment will you choose? Why? e. Based on your answers in (a) through (d), which project will you finally choose? Why?
6 Lewis Services is evaluating six investment opportunities (projects). The following table reflects each project’s net present value NPV and the respective initial investments required. All of these projects are independent.Project NPV InvestmentI 2,500 2,500II 4,000 20,000III 7,500 30,000IV 8,000 40,000V 2,000 10,000VI 2,500 5,000Lewis has an investment constraint of P50,000. Which combination of projects would represent the optimal investment that should be recommended to Lewis Services’ management? Group of answer choices II, IV and III IV only I, IV and VI I, II, III, V, and VI I, III and IV I, II, III, IV, V, and VI I, III, and VI I, III, V, and VI
q5.31
solve a and b given in the image provided.
Question 2: Boisjoly Product Company is considering two mutually exclusive investment projects. The projects' annual expected cash flows are as follows: Estimated Net Cash Flows (million $) Year Project X Project Y 0 (405) (300) 1 134 (387) 2 134 (193) 134 (100) 4 134 600 5 134 600 6 134 850 7 0 (180) (note: numbers in brackets are costs) Compute IRR for each project. If you were told that the company's cost of capital (and also MARR) was 15% per year, which project the company should select?
Based on the parameters calculated, should this project goes ahead? Give your reasons for your answer. Economic Parameters Base case Project IRR Equity IRR NPV($millions)@12% Capital Expenditure($million) PayBack period (Year) WACC (Based on 75/25) 13.68 15.89 9,172,880 (85,000,000) 8.92 0.1246

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