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If the asset base is decreased by P100,000, with no other changes, the
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- The value of a firm Multiple Choice equals the sum of the individual values of the firm's projects and divisions. is unaffected by the value of any one individual project. increases anytime a project with a zero net present value is accepted. is equal to the sum of all of the future cash flows derived from the firm's projects. increases when a new project with a negative net present value is accepted.Need answerIf the net present value of a project is zero based on a discount rate of 16%, then the internal rate of return is: Select one: O a. equal to 16% O b. greater than 16% O c. less than 16% O d. cannot be determined from this data
- A firm has the following investment alternatives (refer to image): Each investment costs $3,000; investments B and C are mutually exclusive,and the firm’s cost of capital is 8 percent. a.) According to the internal rates of return, which investment(s) should the firm make? Why? b.) According to both the net present values and internal rates of return, which investments should the firm make? c.) If the firm could reinvest the $3,600 earned in year 1 from investment B at 10 percent, what effect would that information have on your answer to part b? Would the answer be different if the rate were 14 percent?Consider the following project: Period Net cash flow 0 -100 1 0 2 78.55 3 78.55 The internal rate of return is 20%. The NPV, assuming a 20% opportunity cost of capital, is exactly zero. Calculate the expected economic income and economic depreciation in each year. (Negative answers should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to 2 decimal places.) 1 Period 2 3 Change in value (economic depreciation) (20.00) 54.55 65.46 Expected economic incomeA company has an 11% WACC and is considering twomutually exclusive investments (that cannot be repeated) with the following cash flows: a. What is each project’s NPV?b. What is each project’s IRR?c. What is each project’s MIRR? (Hint: Consider Period 7 as the end of Project B’s life.)d. From your answers to parts a, b, and c, which project would be selected? If the WACCwas 18%, which project would be selected?
- If the profitability index of a project is 0.5, it means: O a. The NPV of the project is greater than zero O b. The project's cost is less than the present value of its cash flows O C. The NPV of the project is greater than 1 Od. The project returns 50 rupees in present value for each Rs 100 invested in itThe management of Bhytyu Limited are considering several mutually exclusive projects with characteristics as shown in the following table. Project A B C D E Initial Cost ($ millions) 87 121 91 95 118 Accounting rate of return 13% 13% 15% 22% 11% Net Present Value ($ millions) 0 11 -1 7 10 Payback Period (Years) 3 5 7 3 5 Internal Rate of Return 9.5% 13.2% 8.0% 11.7% 12.5% Management’s stated goal is to maximise the wealth of the firm’s owners, and to be accepted any investment project must have a minimum investment yield of 10%. Required: Which of the above projects, if any, should be selected by management? Explain the rationale for your choice.Please tutor help me with this question
- Consider the following project: Period 0 1 2 3 Net cash flow −275 0 96.55 327.48 The internal rate of return is 17%. The NPV, assuming a 17% opportunity cost of capital, is exactly zero. Calculate the expected economic income and economic depreciation in each year. (Negative answers should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to 2 decimal places.)Refer to the following information. Which of the two projects, A or B, is better in terms of internal rate of return? Kenner Company is considering two projects. Project A $85,000 $20,676 Initial investment Annual cash flows Life of the project Depreciation per year 2 3 4 5 6 7 8 9 10 6 years $14,167 0.926 1.783 2.577 3.312 3.993 4.623 5.206 5.747 6.247 6.710 Present value of an Annuity of $1 in Arrears Periods 8% 12% 1 0.893 1.690 2.402 3.037 3.605 4.111 4.564 4.968 5.328 5.650 Project B $24,000 $6,011 10% 0.909 1.736 2.487 3.170 3.791 4.355 4.868 5.335 5.759 6.145 5 years $4,800 14% 0.877 1.647 2.322 2.914 4.433 3.889 4.288 4.639 4.946 5.216Calculate the Payback period (PBP) and Profitability Index (PI) of the investment and state the Pro’s and Cons of this method The annual incremental profits/ (losses) relating to the investment are estimated as follows: Years CF’s (000) Year 0 -175,000 Year 1 K11,000 Year 2 K3,000 Year 3 K34,000 Year 4 K47,000 Year 5 K8,000 Investment at the start of the project would be K175, 000,000.the investment sum assuming nil disposal value after five years, would be written off using the equal instalment method. The depreciation has been included in the profit estimates above, which should be assumed to arise at each year end. Assume the cost of Capital is 12% Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 D.f 1.00 0.893 0.797 0.712 0.636 0.567
