Consider the cash flows for projects Alpha and Beta as follows:ProjectAlphaBetaRequired:(a)(b)Year 0 cash flow-$250- $150Year 1 cash flow0Year 2 cash flow4002000Determine the discount rate that will make the NPV of the two projects equal. (Ignorenegative discount rates.)Determine the range of discount rates in which project Alpha is preferred to project Beta.

Find the discount rate that will make the NPV of two projects equalNPV, or net present value, is how…

Answered: Consider the cash flows for projects…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Total project value ($) Debt Option Loan-to-value Rate (%) Interest only period (years) Amortization (years) $35,000,000.00 A 65% 3.25% 3 20 B 70% 3.25% 3 30 C 70% 3.00% 0 30 D 50% 4.25% 0 30
Ch 11: Assignment - The Basics of Capital Budgeting Part II PTODIEM Vwalk-Tirougn A company has a 12% WACC and is considering two mutually exclusive investments (that cannot be repeated) with the following cash flows: 1 3 4 6. 7 Project A -$300 -$387 -$193 -$100 $600 $600 $850 -$180 Project B -$405 $131 $131 $131 $131 $131 $131 $0 a. What is each project's NPV? Negative values, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to the nearest cent. Project A: $ Project B: $ b. What is each project's IRR? Do not round intermediate calculations. Round your answers to two decimal places. Project A: % Project B: c. What is each project's MIRR? (Hint: Consider Period 7 as the end of Project B's life.) Do not round intermediate calculations. Round your answers to two decimal places. Project A: % Project B: % d. From your answers to parts a-c, which project would be selected? -Select-
Using image: a-1. What is the payback period for each project a-2. If you apply the payback criterion, which investment will you choose? b-1. What is the discounted payback period for each project? b-2. If you apply the discounted payback criterion, which investment will you choose? c-1. What is the NPV for each project? c-2. If you apply the NPV criterion, which investment will you choose? d-1. What is the IRR for each project? d-2. If you apply the IRR criterion, which investment will you choose? e-1. What is the profitability index for each project? e-2. If you apply the profitability index criterion, which investment will you choose? f. Based on your answers in (a) through (e), which project will you finally choose?
You are given the following cash flow information for a project. Given this information, and assuming that the correct risk-adjusted discount rate (WACC) to use is 14 percent, while the firm's true reinvestment rate is 23 percent, determine the modified net present value (MNPV) for this project. Year 0 1 2 3 4 5 O $20,408 O $22,162 O $21.277 $21,728 O$20,883 Cash Flow -$20,000.00 $16,000.00 $10,000.00 $15,000.00 $16,000.00 $17,000.00
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Consider the following two mutually exclusive projects: Year Cash Flow (X) Cash Flow (Y) 0 -24,063 -24,063 1 10,320 12,063 2 10,900 9,360 3 10,800 10,400 Sketch the NPV profiles for X and Y over a range of discount rates from zero to 25 percent (take 0%, 5%, 10%, 15%, 20%, 25%). Calculate the IRR of the projects. What is the relationship between NPV and IRR for your values? What is the crossover rate for these two projects and what it indicates for your values? Note - answer all the parts of the question.
3e.a.Determinethe payback period for each b.Calculatethe net present value (NPV) for each c.Calculatethe profitability index (PI) for each project. d.Calculatethe internal rate of return (IRR) for each e.Basedon ALL your answers above, explain briefly which project should be Note: i just need (e) no question answer not all no need excle formula , thank you
There are two altematives: A, and A, Use trial & error and interpolation methods for finding exact value of IRR for difference between two alternatives (Draw cash flow diagram of difference). Which project is a better choice? Given MARR is 9%. Write formula and show your solution step by step A1 -$12,000 4,200 A2 -$1,000 n 800 6,225 500 6,330 500 IRR 17.43% 40.96% 1.
Consider the following project balance profiles for proposed investment projects. Statement 1-For Project A, the cash now at the end of year 2 is $100.Statement 2-For Project C, its net future worth at the end of year 2 is $150.Statement 3-For Project B, the interest rate used is 25%.Statement 4-For Project A, the rate of return should be greater than 15%.Which of the statement(s) above is (are) correct?(a) Just Statements 1 and 2(b) Just Statements 2 and 3(c) Just Statements 1 and 3( d) Just Statements 2, 3, and 4
Following projects, A and B are mutually exclusive. Use a discount rate of 7.6 percent to solve the following. Year 1 2. 3 4 5. Project A -11000 4000 3000 4000 4000 2000 Project B -15000 5000 4000 5000 7000 3000 Calculate the NPV and IRR, and select the project.
If for a certain project the income of the development is received later than the costs are incurred, a/an in the effective rate of interest will lead the discounted payback period to Select one: a. Decrease, increase b. Increase, increase c. No mutual relationship between the two. d. Decrease/lncrease, stay constant

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