Net Present Value Analysis Hermson Company must evaluate two capital expenditure proposals Hermson's hurdle rate is 12%. Data for the two proposals follow Proposal Proposal Required investment Annual after-tax cash inflows After cas cash nows at the end of years 16% and 12 Life of project inical outflows PV of future cash flown Using net present value analysis, which proposal is the more attractive? Do not use negative signs with your answers. Round PV answers to the nearest whole number. Use rounded answers for subsequent calculation of net present value Proposal X Proposal Y Net present value 1 $ 01 D 05 Which proposal is more attractive? $630,000 $40.000 148.500 0 D 445,500 12 years 12 years

Net Present Value Analysis Hermson Company must evaluate two capital expenditure proposals Hermson's hurdle rate is 12%. Data for the two proposals follow Proposal Proposal Required investment Annual after-tax cash inflows After cas cash nows at the end of years 16% and 12 Life of project inical outflows PV of future cash flown Using net present value analysis, which proposal is the more attractive? Do not use negative signs with your answers. Round PV answers to the nearest whole number. Use rounded answers for subsequent calculation of net present value Proposal X Proposal Y Net present value 1 $ 01 D 05 Which proposal is more attractive? $630,000 $40.000 148.500 0 D 445,500 12 years 12 years

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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A project which requires an investment of OMR 18,000, duration of the project is 2 years, average net cash inflows were OMR 12,000 and annual variable cost is OMR 8,000. Assuming a discount rate at 12%, evaluate the sensitivity of Initial Investment influencing NPV with above information. Select one: O A. 11.25% B. 12.67% O C. 16.87% D. 6.75%
Q16) Salalah company management is considering three competing investment Projects A, B and C. Year Project A Project C 1000 300 Project B Initial Investment 1000 250 1000 1 275 275 250 300 300 300 300 3 250 275 4 250 250 275 275 Assume a discount Rate of 3% Required: Use the information below and help the management in choosing the most desirable Project using the following techniques: a) Payback period b) Discounted Payback Period c) Net Present value d) Profitability index.
Information on four investment proposals is given below: Investment required. Present value of cash inflows Net present value Life of the project Answer is complete but not entirely correct. Profitability Index Investment Proposal ABCO A В Required: 1. Compute the profitability index for each investment proposal. (Round your answers to 2 decimal places.) 2. Rank the proposals in terms of preference. с D 3 0.41 0.38 0.50 0.33 Rank Preference A $ (240,000) 337,300 $ 97,300 Second Third First Fourth ✓ ✔ 5 years Investment Proposal $ (73,500) 110,250 $36,750 B $ (105,000) 144,900 $ 39,900 7 years 6 years $ (126,000). 168,000 $ 42,000 6 years
Arnold Engineering has available two mutually exclusive investment proposals, A and B. Their net cash flows are as shown in the table over a 10-year planning horizon. MARR is 12%. Determine which alternative the decision maker should select using an external rate of return approach.
Use the following information to answer questions 11-15:A firm evaluates a project with the following cash flows. The firm has a 2 year payback period criteria and a required return of 11 percent.Year0 1 2 3 4 5Cash flow (OMR) -24,000 17,000 12,000 9,000 -8,000 11,0001-Whatis the net present value for the project?2-Whatis the payback period for the project?3-what is the discounted payback period for the project? 4-What is the profitability index for the project?5-Given your analysis, should the firm accept or reject the project?
Compute the discounted payback statistic for Project y and recommend whether the firm should accept or reject the project with the cash flows shown as follows
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compute the discounted payback statistic for Project X and recommend whether the firm should accept or reject the project with the cash flows shown as follows if the appropriate cost of capital is 10 percent and the maximum allowable discounted payback is three years. Time: 0 1 2 3 4 5 Cash flow: -1,000 500 480 400 300 150 Multiple Choice ___ 2.49 years, accept ___ 3.49 years, reject ___ 4.98 years, reject ___ 2.98 years, accept
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