Capital Budgeting 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 13% to evaluate projects such as these. TimeProject A Cash FlowsProject B Cash Flows0-$46,800-$63,6001-21,60020,400243,20020,400343,20020,400443,20020,4005-28,80020,400 Calculate the payback period and discounted payback period for projects A & B.

The payback period is the number of years it takes to recover the initial cost. In the case of a…

Answered: Capital Budgeting Assume you are…

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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A firm with the following investment opportunities has a capital budget of $10,000. According to the net present value technique, which investments should the firm make if the firm's cost of capital is 10%? Investment A B C Cost $10,000 $7,000 $3,000 Cash Inflow $12,000. $8,600 $4,000
The Basics of Capital Budgeting Your division is considering two projects with the following cash flows (in millions): 0 1 2 3 Project A -$31 $7 $12 $22 Project B -$19 $13 $6 $5 What are the projects' NPVs assuming the WACC is 5%? Enter your answer in millions. For example, an answer of $10,550,000 should be entered as 10.55. Negative values, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to two decimal places. Project A: $___ million Project B: $___ million What are the projects' NPVs assuming the WACC is 10%? Enter your answer in millions. For example, an answer of $10,550,000 should be entered as 10.55. Negative values, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to two decimal places. Project A: $___ million Project B: $___ million What are the projects' NPVs assuming the…
What is the formula of IRR in capital Budgeting? In the pic attached how did you get the IRR here? How to arrive in its amount of irr?
Capital Budgeting 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 12% to evaluate projects such as these. Time Project A Cash Flows Project B Cash Flows 0 -$300,000 -$405,000 1 -387,000 134,000 2 -193,000 134,000 3 -100,000 134,000 4 600,000 134,000 5 600,000 134,000 6 850,000 134,000 7 -180,000 0 Under what conditions on the cost of capital should project B be preferred to project A?
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Project A has the following estimated cash flows and present values:Year Cash flow $ Discount factor@ 12% Present value $0 Cost (95 000) 1.0 (95 000) 1–5 Contributionper annum 50 000 3.605 180 250 1–5 Fixed costsper annum (25 000) 3.605 (90 125) 5 Residual value 20 000 0.567 11 340 The benefit of using sensitivity analysis in an investment appraisal would be:
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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?
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The following are the net cash flow estimates (in thousands of dollars) of the two (2) proposed projects, you are planning to invest in. Expected Net Cash Flow Year Restaurant & Bar Hardware $M $M 0 (200) (200) 1 10 70 2 60…

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Time	Project A Cash Flows	Project B Cash Flows
0	-$46,800	-$63,600
1	-21,600	20,400
2	43,200	20,400
3	43,200	20,400
4	43,200	20,400
5	-28,800	20,400