Mr Ali has an option of investing in one project from the proposed three different projects. Discount rate is 12%. The initial investment and cash flows are given below years Cf – project 1 Cf – project 2 Cf – project 3 0 (10,000) (28,000) (22,000) 1 1000 3000 4000 2 880 7000 1000 3 6000 8000 1000 4 4000 12000 9000 5 2000 7500 11500 6 3650 6400 8900 a. Calculate payback for all three projects b. Calculate discounted payback for all three projects c. Calculate NPV for all three projects d. Calculate profitability index for all three projects e. Calculate IRR for all three projects f. Write a detailed comment on which project Mr Ali must invest on the basis of above calculated criteria’s and why he must ignore the other projects.
Mr Ali has an option of investing in one project from the proposed three different projects. Discount rate is 12%. The initial investment and cash flows are given below years Cf – project 1 Cf – project 2 Cf – project 3 0 (10,000) (28,000) (22,000) 1 1000 3000 4000 2 880 7000 1000 3 6000 8000 1000 4 4000 12000 9000 5 2000 7500 11500 6 3650 6400 8900 a. Calculate payback for all three projects b. Calculate discounted payback for all three projects c. Calculate NPV for all three projects d. Calculate profitability index for all three projects e. Calculate IRR for all three projects f. Write a detailed comment on which project Mr Ali must invest on the basis of above calculated criteria’s and why he must ignore the other projects.
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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Mr Ali has an option of investing in one project from the proposed three different projects. Discount rate is 12%. The initial investment and cash flows are given below
|
years |
Cf – project 1 |
Cf – project 2 |
Cf – project 3 |
|
0 |
(10,000) |
(28,000) |
(22,000) |
|
1 |
1000 |
3000 |
4000 |
|
2 |
880 |
7000 |
1000 |
|
3 |
6000 |
8000 |
1000 |
|
4 |
4000 |
12000 |
9000 |
|
5 |
2000 |
7500 |
11500 |
|
6 |
3650 |
6400 |
8900 |
a. Calculate payback for all three projects
b. Calculate discounted payback for all three projects
c. Calculate NPV for all three projects
d. Calculate profitability index for all three projects
e. Calculate IRR for all three projects
f. Write a detailed comment on which project Mr Ali must invest on the basis of above calculated criteria’s and why he must ignore the other projects.
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