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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Question
Need answers for 2 and 3
Transcribed Image Text:Tortellini Company hired you as their Financial Analyst. The Cap Bud director
knows that with your expertise, you will be able to provide a comprehensive
analysis using the different methods. He presented two proposed capital projects
that is Project Alpha and Project Omega. Every project costs P10,000. A 12% cost
of capital was proposed for each project. The following are the projected net
cash flows for the project:
Expected Net Cash Flows
Project Alpha
(P10,000)
Project Omega
(P10,000)
3.500
3,500
Year
1
6,500
2
3,000
3
3,000
3,500
4
1,000
3,500
Required:
1. Calculate the following using the information above:
A. payback period
B. Net Present Value (NPV)
C. Internal Rate of Return (IRR)
D. Modified Internal Rate of Return (MIRR).
2. Which of the following projects, if independent, should be accepted?
3. Which of the following projects, mutually exclusive should be accepted?
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