Capital budgeting criteria: mutually exclusive projectsA firm with a WACC of 10% is considering the following mutually exclusiveprojects:4++Project AProject B-$350$60$60$60$235$235-$700$200$200$80$80$80Which project would you recommend?3.

The computation of NPV of project A: Hence, the NPV is $105.64.

Answered: Capital budgeting criteria: 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

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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…
Question 1: Salalalh Methanol company management is considering three competing investment Projects A, B & C_ Year Initial Investment 1 Project A Project B Project C 12000 12000 12000 1200 3100 4150 5260 5225 8250 3800 7360 9275 9300 4 4600 9460 Assume a discount Rate of 5.45 % Use the information above and help the management in choosing the most desirable Project using Payback period, Discounted payback Net Present value and Profitability Index. Out of the four methods which is considered to be the most desirable. Explain
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Capital Budgeting Techniques Analyze the two independent projects, X and Y. Each project costs $10,000, and the firm’s required rate of return is 12%. The expected net cash flows are as follows: Outflows Inflows Projects Year 1 2 3 4 X -10,000 6,500 3,000 3,000 1,000 Y -10,000 3,500 3,500 3,500 5,500 Required: Calculate for each project: Payback Period IRR NPV PI Give your decision regarding acceptation and rejection of the project. Explain which criteria you based your decision upon and why?
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Data for Fun 4 All, Inc.'s capital budgeting projects: Project 1 2 3 WACC 10% 10% 10% NPV 500 550 -300IRR 11% 10.50% 9% Based on these data, knowing that these projects are INDEPENDENT, you would choose project A.Project 2 B.Project 3 C.Project 1 D.Project 1 and 2.
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?
• You, a project manager, are in the middle of choosing between two different projects with the following cash flows: Time period 0 1 2 3 4 Project A $(60,000) $5,000 $10,000 $10,000 $75,000 Project B $(60,000) $50,000 $30,000 $10,000 $10,000 • Determine which project you should act on using NPV with an interest rate of 12%.
Consider a firm with a budget constraint of $1m and five indivisible projects available to it as in the below table. Project Initial Outlay Net Present Value Project A 350,000 280,000 Project B 200,000 260,000 Project C 600,000 500,000 Project D 200,000 120,000 Project E 280,000 270,000 Which project should be accepted? Justify your answer.
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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Capital budgeting criteria: mutually exclusive projects A firm with a WACC of 10% is considering the following mutually exclusive projects: 4 + + Project A Project B -$350 $60 $60 $60 $235 $235 -$700 $200 $200 $80 $80 $80 Which project would you recommend? 3.