Consider the following cash flows for two mutually exclusive capital investment projects. The required rate ofreturn is 16%. Use this information for the next 3 questions.YearProject A Cash FlowProject B Cash Flow($50,000)($20,000)15,0006,00015,0006,000315,0006,000413,5005,40013,5005,4006,7505,400 Calculate the net present value of project A.$1,564.25$342.28$1,245.11$2,709,21$3,802

Mutually exclusive projects are a set of projects out of which only one project can be accepted.

Answered: Consider the following cash flows for…

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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Consider the following two mutually exclusive projects: Year Cash flow project A (RM) 0 1 2 3 4 -54,000 12,700 23,200 27,600 46,500 Cash flow Project B (RM) -23,000 11,600 11,200 12,500 6,000 Whichever project you choose, if you require a 14 percent return on your investment i) Compute the payback period for both project ii) Compute the Net Present Value (NPV) for both projects. iii) Which project do you prefer and which? Fully explain the result of your analysis
Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) -$ 15,456 5,225 8,223 13,013 8,705 0 1 234 -$ 276,363 26,400 51,000 57,000 402,000 Whichever project you choose, if any, you require a 6 percent return on your investment. a. What is the payback period for Project A? Payback period b. What is the payback period for Project B? Payback period c. What is the discounted payback period for Project A? Discounted payback period
Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 −$29,000 −$29000 1 14,400 4,300 2 12,300 9,800 3 9,200 15,200 4 5,100 16,800 a) What is the Internal Rate of Return (IRR) for each of these projects? b) Using the IRR decision rule, which project should the company accept? c) If the required return is 11 percent, what is the Net Present Value (NV) for each of these projects? d) Using the NPV decision rule, which project should the company accept? e) Why do you think the NPV and IRR rules do not agree on same project approval/rejection direction?
Refer to two projects with the following cash flows: Year Project A Project B 0 -$110 -$110 1 45 55 2 45 55 3 45 55 4 45 If the opportunity cost of capital is 11%, what is the profitability index for each project?
Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 −$350,000 −$35,000 1 25,000 17,000 2 70,000 11,000 3 70,000 17,000 4 430,000 11,000 Assume you require a 15 percent return on your investment and a payback of 4 years. a. If you apply the discounted payback criterion, which investment will you choose? Why? b. If you apply the NPV criterion, which investment will you choose? Why? c. Based on your answers in (a) and (b), what you can say anything about the IRR of both projects? which project will you finally choose? Why?
Compute the NPV for Project X and accept or reject the project with the cash flows shown below if the appropriate cost of capital is 10 percent. Time: 1 2 4 Cash flow: -150 -150 250 225 200
3) Consider the following two projects: Net Cash Flow Each Period Initial Outlay 1 2 3 4 Project A $4,000,000 $2,003,000 $2,003,000 $2,003,000 $2,003,000 Project B $4,000,000 0 0 0 $11,000,000 Calculate the net present value of each of the above projects, assuming a 14 percent discount rate. What is the internal rate of return for each of the above projects? Compare and explain the conflicting rankings of the NPVs and IRRs obtained in parts a and b above. If 14 percent is the required rate of return, and these projects are independent, what decision should be made? If 14 percent is the required rate of return, and the projects are mutually exclusive, what decision should be made?
Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 -$ 243,567 -$ 15,530 1 27,200 55,000 60,000 413,000 234 5,173 8,261 13,237 8,729 Whichever project you choose, if any, you require a 6 percent return on your investment. a. What is the payback period for Project A? Payback period
Determine which of the following independent projects should be selected for investment if a maximum of $240,000 is available and the MARR is 10% per year. Use the PW method to evaluate mutually exclusive bundles to perform your analysis. Construct the cash flow diagram for each. Investment, Net Cash Flow, $ per year Life, Project years S -100,000 50,000 8 M -125,000 24,000 8 A -120,000 75,000 8. -220,000 39,000 8 -200,000 82,000 8.
Consider the investment project with the following net cash flows: What would be the value of X if the project's IRR is 25%?
An Organization invests BDT. 10,00,000 for a project and the discount rate is 12%. After analyzing the NPV and BCR value for the giventable, make a decision. (Draw the cash flow diagram)
You are given the following cash flows for a project. Assuming a cost of capital of 12.84 percent. determine the profitability index for this project. Year 0 1 2 3 4 5 O 14981 O 1.68/7 O1.7508 1.6245 1.5613 Cash Flow -$1,115.00 $554.00 $622.00 $648 00 $426.00 $216.00

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