Financial accounting Consider the following projects:Cash Flows ($)Project COD-10,000E-20,000C120,00035,000Assume that the projects are mutually exclusive and that the opportunity cost ofcapital is 10%.a. Calculate the profitability index for each project.b. Calculate the profitability index using the incremental cash flows.

Part (a): Profitability Index for Each ProjectThe Profitability Index (PI) measures how much value…

Answered: Consider the following projects: Cash…

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter12: Capital Budgeting: Decision Criteria

Section: Chapter Questions

Problem 13P

See similar textbooks

Similar questions

Consider the following projects: Cash Flows ($) Project D E CO00 C101 -11,700 23,400 -21,700 37,975 Assume that the projects are mutually exclusive and that the opportunity cost of capital is 12%. a. Calculate the profitability index for each project. b-1. Calculate the profitability-index using the incremental cash flows. b-2. Which project should you choose?
Consider the following projects: Cash Flows ($) Co Project D E -11, 100 -21, 100 C₁ 22, 200 34,500 Assume that the projects are mutually exclusive and that the opportunity cost of capital is 11%. a. Calculate the profitability index for each project. b-1. Calculate the profitability-index using the incremental cash flows. b-2. Which project should you choose?
Consider cash flows for the following investment projects (MARR = 15 %). Suppose that projects are mutually exclusive. Which project would you select based on AE criterion? Project A -3000 Project B -3500 ProjectC 4000 1400 1100 1500 2. 1650 1000 1500 3. 1300 1000 1800 1800 4 750 1000
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 (X) Cash Flow (Y)0 -$365,000 -$38,0001 25,000 16,0002 65,000 12,0003 65,000 17,0004 425,000 15,000Whichever project you choose, if any, you require a 13 percent return on your investment. i. Which investment will you choose if you use the payback decision criteria? Justify your answer.ii. Which investment will you choose if you use the NPV decision criteria? Justify your answer.iii. Which project will you choose ultimately based on your answers above?
Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 −$29,000 −$29000 1 14,400 4,300 2 12,300 9,800 3 9,200 15,200 4 5,100 16,800 a) What is the Internal Rate of Return (IRR) for each of these projects? b) Using the IRR decision rule, which project should the company accept? c) If the required return is 11 percent, what is the Net Present Value (NV) for each of these projects? d) Using the NPV decision rule, which project should the company accept? e) Why do you think the NPV and IRR rules do not agree on same project approval/rejection direction?
Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 -$ 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
Baghiben
Consider the cash flow of the two projects depicted in Table 3. If WiseGuy Inc. uses payback period rule to choose projects, which of the projects (Project A or Project B) will rank highest? TABLE 3 Project A Project B Time 0. -11,000. -10,000 Time 1. 3,000. 4,000 Time 2. 8,000. 3,000 Time 3. 3,000. 10,000 A) Project A B) Project B C) Project A and Project B have the same ranking. D) It cannot calculate a payback period without a discount rate. 7 Consider the cash flow of the two projects depicted in Table 3. If WiseGuy Inc. uses IRR rule to choose projects, which of the projects (Project A or Project B) will rank highest? A) Project A B) Project B C) Project A and Project B have the same ranking. D) It cannot calculate a payback period without a discount rate.
Consider the following two mutually exclusive projects: What is the incremental IRR? Cash Flows ($) Project C0 C1 C2 C3 A -90 +60 +50 0 B -100 0 0 +140 Multiple Choice The incremental IRR is 6% The incremental IRR is 20% The incremental IRR is 9.6% The incremental IRR is 15%
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
A project has the following cash flows: Year Cash Flows 0 $ 128,200 12 1 2 3 4 49,400 63,800 51,600 28,100 The required return is 8.7 percent. What is the profitability index for this project? Multiple Choice 1.142 1.003 .803 1.038

SEE MORE QUESTIONS

Recommended textbooks for you

Intermediate Financial Management (MindTap Course…

Finance

ISBN:

9781337395083

Author:

Eugene F. Brigham, Phillip R. Daves

Publisher:

Cengage Learning

EBK CONTEMPORARY FINANCIAL MANAGEMENT

Finance

ISBN:

9781337514835

Author:

MOYER

Publisher:

CENGAGE LEARNING - CONSIGNMENT

Intermediate Financial Management (MindTap Course…

Finance

ISBN:

9781337395083

Author:

Eugene F. Brigham, Phillip R. Daves

Publisher:

Cengage Learning

EBK CONTEMPORARY FINANCIAL MANAGEMENT

Finance

ISBN:

9781337514835

Author:

MOYER

Publisher:

CENGAGE LEARNING - CONSIGNMENT

SEE MORE TEXTBOOKS