company management is considering three competing Project A inv Project B Project C 10000 Year Initial Investment 10000 10000 1 1100 4160 6225 3100 5260 8250 3800 7360 9275 4 4600 9460 9300 Assume a discount Rate of 4.05% 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

company management is considering three competing Project A inv Project B Project C 10000 Year Initial Investment 10000 10000 1 1100 4160 6225 3100 5260 8250 3800 7360 9275 4 4600 9460 9300 Assume a discount Rate of 4.05% 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

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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Weston Systems is considering the following independent projects for the coming year: Project Required Investment Expected Rate of Return Risk X $8 million 12.5% High Y 8 million 9.5% Average Z 3 million 5.5% Low Weston’s WACC is 9 percent, but it adjusts for risk by adding 2 percent to the WACC for high-risk projects and subtracting 2 percent for low-risk projects. What would be the minimum acceptable return for each of the three projects? Which project(s) should Weston accept assuming it faces no capital constraints?
Question 1: Salalalh Methanol company management is considering three competing investment Projects A, B & C Year Initial Investment 1 2 Project A Project B 12000 4150 Project C 12000 12000 5225 8250 1200 3100 3800 4600 Assume a discount Rate of 5.45 % 5260 7360 9460 9275 9300 4 Use the information above and help the management in choosing the most desirable Project using Payback period, Discounted payback Net Present value and Profitability Index. Out of the four methods which is considered to be the most desirable. Explain
Based on the information below which projects will we choose based on weighted average profitabiltity Index if we only have OMR500,000 to invest? Project NPV Investment PI A 130,000 200,000 B 241,250 225,000 C 294,250 275,000 D 262,000 250,000 Select one: a. WAPI AD b. WAPI AB c. WAPI BD d. WAPI BC
Consider the following two projects: Cash flows Project A Project B C0�0 −$ 240 −$ 240 C1�1 100 123 C2�2 100 123 C3�3 100 123 C4�4 100 a. If the opportunity cost of capital is 8%, which of these two projects would you accept (A, B, or both)? b. Suppose that you can choose only one of these two projects. Which would you choose? The discount rate is still 8%. c. Which one would you choose if the cost of capital is 16%? d. What is the payback period of each project? e. Is the project with the shortest payback period also the one with the highest NPV? f. What are the internal rates of return on the two projects? g. Does the IRR rule in this case give the same answer as NPV? h. If the opportunity cost of capital is 8%, what is the profitability index for each project? i. Is the project with the highest profitability index also the one with the highest NPV? j. Which measure should you use to choose between the projects?
The Company has three potential projects from which to choose. Selected information on each of the three projects follows: Project A Project B Project C Investment required $44,400 $55,700 $53,100 Net present value of project $49,100 $74,100 $69,100 Using the profitability index, rank the projects from most profitable to least profitable. A, B, C B, A, C B, C, A C, B, A
The answer is project B but please answer why that is the correct answer. Engineering economic question
BATA plc. is considering the following two projects. Only one of which maybe selected. Each project has a required rate of return of 15% for A and 10% for B with the following cash flowsYear Project A Project B0 K (200,000) K (175,000)1 68,700 50,0002 44,500 60,2503 56,500 45,2504 35,500 80,250Required:A. Calculate for each project:Payback period for each of the projects, Net present value for each of the projects and Internal rate of return for each of the projectsB. Explain which project you would recommend for acceptance for each of the three methods and overall. C. Briefly discuss the relative merits of the pay back and net present value methods of evaluation methods mentioned in (a) above
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
Pecos Corporation is considering several investment proposals, as shown below: Investment required Present value of future net Investment Proposal OD, B, C, A O B, D, C, A OB, D, A, C O A, C, B, D A B $ 80,000 $ 100,000 C $ 60,000 D $ 75,000 cash flows $ 96,000 $ 150,000 $ 84,000 $ 120,000 If the project profitability index is used, the ranking of the projects from most to least profitable would be:
Information on four investment proposals is given below: Investment required. Present value of cash inflows Net present value Life of the project Answer is complete but not entirely correct. Profitability Index Investment Proposal ABCO A В Required: 1. Compute the profitability index for each investment proposal. (Round your answers to 2 decimal places.) 2. Rank the proposals in terms of preference. с D 3 0.41 0.38 0.50 0.33 Rank Preference A $ (240,000) 337,300 $ 97,300 Second Third First Fourth ✓ ✔ 5 years Investment Proposal $ (73,500) 110,250 $36,750 B $ (105,000) 144,900 $ 39,900 7 years 6 years $ (126,000). 168,000 $ 42,000 6 years
Connor Corporation is considering two projects (see below). For your analysis, ass rate of return of 10%. Based on your analysis, which is the best choice? Initial Investment Cash Flow Year 1 PV NPV Profitability Index IRR Project A -465,000 510,000 463,636.364 ($1,363.64) $1.00 ANSWER 10% Project B -700,000 You can change the i 850,000 772,727.273
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