Galaxy Satellite Co. is attempting to select the best group of independent projects competing for thefirm's fixed capital budget of $10,000,000. Any unused portion of this budget will earn less than its 20percent cost of capital. A summary of key data about the proposed projects follows.ProjectАInitial InvestmentIRRPV of inflows at 20%$3,000,000$9,000,000$1,000,000$7,000,000$3,050,000$9,320,000$1,060,000$7,350,00021%В25%24%23%Use the NPV approach to select the best group of projects.

We need to do capital rationing on the basis of NPV. NPV is the difference between present value of…

Answered: Galaxy Satellite Co. is attempting to…

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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Operation management
A firm has a capital budget of $3,000 and a WACC of 8%. Should the firm choose project A . project B , project C , project D , project E ? Project Cost NPV IRR A $1,000 $2,000 10% B $1,000 $1,500 13% C $1,000 $3,000 12% D $1,000 $2,500 14% E $1,000 $500 15%
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…
7 independent project proposals from various departments of an enterprise has come. The budget allocated by the management for these projects is 600,000 TL. Current value identify the appropriate projects using the method. (I = 20% will be accepted and the first take p=0.2 for trial. ) Scrap Value (Thousand (Thousand TL) Cost Annual Smooth Useful Project TL) earnings (thousand TL) lifetime (year) 1 200 60 10 100 35 10 3 100 30 10 4 150 46 8. 250 75 10 10 6. 100 45 7 50 19 8.
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?
man.2
Please answer the following MCQs and T or Fs from 30 till 34
Payback and NPV Neil Corporation has three projects under consideration. The cash flows for each project are shown in the following table. The firm has a 16% cost of capital. Calculate each project’s payback period. Which project is preferred according to this method?
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.
Projects 1 and 2, of equal risk, are alternatives for expanding X Company's capacity. The firm's cost of capital is 13%. The cash flows for each project are shown in the following table: Project 1 Project 2 Initial investment $60,000 $30,000 Year Cash inflows 1 $10,000 $10,000 2 $15,000 $10,000 3 $20,000 $10,000 4 $25,000 $10,000 5 $30,000 $10,000 Your Answer: (Round to two decimal places.) a. The payback period of Project 1 is The payback period of Project 2 is b. The NPV of Project 1 is $ The NPV of Project 2 is $ c. The IRR of Project 1 is The IRR of Project 2 is d. Which project will you recommend? Project %. %. years. years.
OPPfel Hospitality Consulting Inc. has two similar financial projects to offer one of its corporate clients in the hospitality industry. OPPfel wants to evaluate a set of capital budgeting projects and come up with the best decision according to the project’s IRR and PI for the client. NINV and NCF data for both of the projects are shown in the data table below: Year Project AR Project BF 0 -$100,000 -$100,000 1 $70,000 $20,000 2 $60,000 $50,000 3 $20,000 $100,000 If the minimum required rate of return is 10.00% for both of the capital budgeting projects, which one of the projects provides a better investment decision that OPPfel can consult to the its client?
Ford Allen, CE0 of the Amstelveen Corporation, has some major decisions to make. Seven division managers are clamoring for investment in projects totaling €34,000,000. Allen is working to fund them all, but currently only has €8,000,000 available for Amstelveen to invest. Proposals (all amounts in € thousands) Project B. D Initial Investment 1,000 2,000 5,000 8,000 5,000 10,000 3,000 500 1,500 4,800 2,000 2,000 1,000 1,000 1,000 2,000 3,000 500 3,000 1,500 2,000 1,200 1,500 2,000 Year 1 Year 2 6,000 8,000 5,000 500 -3,000 2,000 1,000 200 -4,000 2,500 3,000 3,000 400 Year 3 300 1,000 1,500 Year 4 Year 5 Amstelveen's cost of capital is 9%, it uses a payback period cut-off of 2 years, and it calculates depreciation on a straight-line basis with the assumption of a zero salvage value. Allen has tasked you, an employee in the corporate controller's office, with several tasks. First, if there are no capital constraints, identify each project as advisable or inadvisable to pursue. Calculate…

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