Lobers, Inc., has two investment proposals, which have the following characteristics:PROJECT APROJECT BPROFITAFTER TAXESNET CASHFLOWPROFITAFTER TAXESNET CASHFLOWPERIODCOSTCOST$9,000$12,0001$1,000$5,000$1,000$5,0001,0004,0001,0005,00031,0003,0004,0008,000For each project, compute its payback period, its net present value, and its profitabilityindex using a discount rate of 15 percent.

Capital budgeting is the process with the help of which a corporation makes capital budgeting…

Lobers, Inc., has two investment proposals, which have the following characteristics: PROJECT A PROJECT B PROFIT AFTER TAXES NET CASH FLOW NET CASH FLOW PROFIT PERIOD COST COST AFTER TAXES $9,000 $12,000 $1,000 $5,000 $1,000 $5,000 2 1,000 4,000 1,000 4,000 5,000 3 1,000 3,000 8,000 For each project, compute its payback period, its net present value, and its profitability index using a discount rate of 15 percent.

Lobers, Inc., has two investment proposals, which have the following characteristics: PROJECT A PROJECT B PROFIT AFTER TAXES NET CASH FLOW NET CASH FLOW PROFIT PERIOD COST COST AFTER TAXES $9,000 $12,000 $1,000 $5,000 $1,000 $5,000 2 1,000 4,000 1,000 4,000 5,000 3 1,000 3,000 8,000 For each project, compute its payback period, its net present value, and its profitability index using a discount rate of 15 percent.

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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Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

100%

Lobers, Inc., has two investment proposals, which have the following characteristics:
PROJECT A
PROJECT B
PROFIT
AFTER TAXES
NET CASH
FLOW
PROFIT
AFTER TAXES
NET CASH
FLOW
PERIOD
COST
COST
$9,000
$12,000
1
$1,000
$5,000
$1,000
$5,000
1,000
4,000
1,000
5,000
3
1,000
3,000
4,000
8,000
For each project, compute its payback period, its net present value, and its profitability
index using a discount rate of 15 percent.

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Consider two projects, T and F, which are mutually exclusive, have unequal lives, and are repeatable. Their cash flows are depicted in the table below: Project Year O Year 1 Year 2 Year 3 Year 4 T -$105 million $62 million $62 million F -$105 million $33 million $33 million $33 million $33 million Assuming a WACC of 7.5%, use the replacement chain approach (RCA) to compare the projects and pick the better choice, given repetition. Note that the investment in project T rises by 7% when repeated, but the other cash flows stay the same. Project T is better as its NPV is higher by $89,657 O Project F is better as its NPV is higher by $89,657 O Project T is better as its NPV is higher by $797,274 O Project F is preferable without repetition, and T is preferable with repetition O Project F is better as its NPV is higher by $797,274
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Consider a project that will produce sales of $55,150 and have costs of $31,100. Taxes will be $5,400 and the depreciation expense will be $3,325. An initial cash outlay of $2,250 is required for net working capital. What is the project's operating cash flow?
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