"Mahnoor Traders" is considering to make investment in one of the two projects.The details of expected cash flows associated with projects are as follows:Project A ($)(1,500,000 +M)300,000400,000500,000900,000YearProject B ($)(1,800,000 +M)550,000750,000900,0001234900,000900,000950,0001,250,0006.900,000For students with last digit of Roll # as 0, 1, or 2For students with last digit of Roll # as 3 to 6,For students with last digit of Roll # as 7 to 9M = 100,000М 3D 200,000M = 0A. Requirement- A: Carryout analysis of the two projects using Payback Period techniqueand suggest which project should be selected.B. Requirement- B: Considering prevailing Rate of Return as 13%, carryout analysis ofthe two projects using NPV technique and suggest which project should be selected.

Capital budgeting can be defined as a process of evaluating project's profitability and feasibility.…

Answered: "Mahnoor Traders" is considering to…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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The following are the net cash flow estimates (in thousands of dollars) of the two (2) proposed projects, you are planning to invest in. Expected Net Cash Flow Year Restaurant & Bar Hardware $M $M 0 (200) (200) 1 10 70 2 60 50 3 100 40…
A firm evaluates all of its projects by applying the IRR rule. A project under consideration has the following cash flows: Year 0 1 2 3 Cash Flow IRR -$ 27,500 11,500 14,500 10,500 If the required return is 16 percent, what is the IRR for this project? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) % Should the firm accept the project? No O Yes
Phoenix Company is considering investments in projects C1 and C2. Both require an initial investment of $234,000 and would yield the following annual net cash flows. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Net cash flows Project C1 Project C2 Year 1 $ 14,000 $ 98,000 Year 2 110,000 98,000 Year 3 170,000 98,000 Totals $ 294,000 $ 294,000 a. The company requires a 10% return from its investments. Compute net present values using factors from Table B.1 in Appendix B to determine which projects, if any, should be accepted.b. Using the answer from part a, is the internal rate of return higher or lower than 10% for (i) Project C1 and (ii) Project C2? Hint: It is not necessary to compute IRR to answer this question.
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Phoenix Company is considering investments in projects C1 and C2. Both require an initial investment of $330,000 and would yield the following annual net cash flows. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Net cash flows Project C1 Project C2 Year 1 $ 46,000 $ 130,000 Year 2 142,000 130,000 Year 3 202,000 130,000 Totals $ 390,000 $ 390,000 a. The company requires a 8% return from its investments. Compute net present values using factors from Table B.1 in Appendix B to determine which projects, if any, should be accepted.b. Using the answer from part a, is the internal rate of return higher or lower than 8% for (i) Project C1 and (ii) Project C2? Hint: It is not necessary to compute IRR to answer this question.
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(Mutually exclusive projects and NPV) You have been assigned the task of evaluating two mutually exclusive projects with the following projected cash flows: Year ܘ ܝ 1 2 1345 Project A Cash Flow $(95,000) 35,000 35,000 35,000 35,000 35,000 Project B Cash Flow $(95,000) The NPV of Project A is $ 0 0 0 0 230,000 (Click on the icon in order to copy its contents into a spreadsheet.) If the appropriate discount rate on these projects is 9 percent, which would be chosen and why (Round to the nearest cent.)
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A firm evaluates all of its projects by applying the IRR rule. A project under consideration has the following cash flows: Year 0 Cash Flow -$ 27,800 1 11,800 -23 3 14,800 10,800 If the required return is 18 percent, what is the IRR for this project? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) IRR %

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