Part AStark Enterprises is considering two mutually exclusive projects. The relevant cash flows foreach project are shown in the table below.Project AlphaProject BetaInitial Investment$50,000$60,000YearNet Cash Inflows1$22,000$35,0002$22,000$25,0003$22,000$20,0004$22,000$15,000a.Suppose the company has a cost of capital of 12%. Determine the Net Present Value(NPV) of each project. Which project is preferred and why?b. What is the discounted payback period for each project?C.why?If you were to guess the IRR for each project would it be above or below 12% and

To evaluate the two projects, we will calculate the Net Present Value (NPV) and the discounted…

Answered: Part A Stark Enterprises is considering…

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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Following is information on two alternative investment projects being considered by Tiger Company. The company requires a 4% return from its investments. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Project X1 Project X2 Initial investment $ (100,000) $ (160,000) Net cash flows in: Year 1 35,000 75,000 Year 2 45,500 65,000 Year 3 70,500 55,000 a. Compute each project’s net present value.b. Compute each project’s profitability index.c. If the company can choose only one project, which should it choose on the basis of profitability index?
Gonzalez Company is considering two new projects with the following net cash flows. The company’s required rate of return on investments is 10%. (PV of $1, FV of $1, PVA of $1, and FVA of $1) Note: Use appropriate factor(s) from the tables provided. Year Net Cash Flows Project 1 Project 2 Initial investment $(46,000) $(74,000) 1. 11,500 35,000 2. 25,900 20,000 3. 21,500 25,000 Compute payback period for each project. Based on payback period, which project is preferred? Compute net present value for each project. Based on net present value, which project is preferred? Complete this question by entering your answers in the tabs below. Required A Required B Compute payback period for each project. Based on payback period, which project is preferred?Note: Cumulative net cash outflows must be entered with a minus sign. Do not round your intermediate calculations. Round your Payback Period answer to 2 decimal places.…
Following is information on two alternative investment projects being considered by Tiger Company. The company requires an 8% return from its investments. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Project X1 Project X2 Initial investment $ (108,000) $ (176,000) Net cash flows in: Year 1 39,000 81,000 Year 2 49,500 71,000 Year 3 74,500 61,000 a. Compute each project’s net present value.b. Compute each project’s profitability index.c. If the company can choose only one project, which should it choose on the basis of profitability index?
Neil Corporation has three projects under consideration. The cash flows for each project are shown in the following table. The firm has a 16% cost of capital. Calculate each project’s payback period. Which project is preferred according to this method?
Following is information on two alternative investment projects being considered by Tiger Company. The company requires a 5% return from its investments. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Project X1 Project X2 Initial investment $ (102,000) $ (164,000) Net cash flows in: Year 1 36,000 76,500 Year 2 46,500 66,500 Year 3 71,500 56,500 a. Compute each project’s net present value.b. Compute each project’s profitability index.c. If the company can choose only one project, which should it choose on the basis of profitability index? Please answer "C" as well. I wasn't able to include that in the images
Company XYZ is considering an investment project that is expected to generate the following cash flows: Year 1: $500,000 Year 2: $700,000 Year 3: $800,000 Year 4: $900,000 Year 5: $1,200,000 The cost of capital for the company is 10%. Calculate the Firm's Present Value (FPV) of the cash flows. To calculate the Firm's Present Value (FPV) of the cash flows, you need to discount each cash flow to its present value using the cost of capital, and then sum up the present values of all cash flows.
Following is information on two alternative investments projects being considered by Tiger Company. The company requires a 15% return from its investments. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Project X1 Initial investment $ (100,000) Net cash flows in: Year 1 37,000 Year 2 Year 3 47,500 72,500 Project X2 $ (150,000) 78,000 68,000 58,000 a. Compute each project's net present value. b. Compute each project's profitability index. If the company can choose only one project, which should it choose on th basis of profitability index? Complete this question by entering your answers in the tabs below. Required A Required B Compute each project's net present value. (Round your answers to the nearest whole dollar.) Net Cash Present Value of Present Value of Flows 1 at 15% Net Cash Flows Project X1 Year 1 Year 2 Year 3 Totals Initial investment Net present value $ 0 $ 0 $ 0 Project X2 Year 1 Year 2 Year 3 Totals $ 0 $ EA Initial…
Suppose a company has the following three projects and limits it capital budget to $50,000. Projects Present Value of Cash Inflows Initial Investment A $40,000 $25,000 B 37,500 25,000 70,000 50,000 1. Calculate the projects' NPVSS. 2. Calculate the projects' Pls. 3. Which project(s) should the company choose? Why?
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Y-Bar uses IRR to evaluate projects. The company has a cost of capital of 15% They are currently comparing two mutually exclusive projects with the following projected cash flows: 3. Project X -R500 000,00-R360 000,00 Project Y Initial Investment Annual Cash flows R25 000,00 R100 000,00 R60 000,00 R250 000,00 R250 000,00 R400 000,00 Year 1 Year 2 R60 000,00 Year 3 Year 4 R90 000,00 Based on the information above, which statement is most accurate: (a) The company will select projectY as it has the highest NPV. (b) The company will select project Y as it has the highest IRR. (c) The company will not select either project X or Y on the bases of IRR. (d) The company will select both project X and Y as the IRR of the projects are very similar. (e) None of the above
Projects A and B, of equal risk, are alternatives for expanding Rosa Company's capacity. The firm's cost of capital is 13%. The cash flows for each project are shown in the following table. Project A Project B Initial Investment -$80,000 -$50,000 Year Cash Flow Cash Flow 1 $15,000 $15,000 2 $20,000 $15,000 3 $25,000 $15,000 4 $30,000 $15,000 5 $35,000 $15,000 a.) calculate each project's payback period. b.) calculate the net present value for each project. c.) calculate the internal rate of return for each project. d.) draw the net present value profiles for both projects on the same set of axes and discuss any conflict in ranking that may exist between NPV and IRR. e.) Summarize the preferences dictated by each measure and indicate which project you would recommend. Explain why.
Following is information on two alternative investment projects being considered by Tiger Company. The company requires a 4% return from its investments. (PV of $1, FV of $1, PVA of $1, and FVA of $1) Note: Use appropriate factor(s) from the tables provided. Initial investment Project X1 $ (80,000) Project X2 $ (120,000) Net cash flows in: Year 1 25,000 60,000 Year 2 Year 3 35,500 50,000 60,500 40,000 a. Compute each project's net present value. b. Compute each project's profitability index. c. If the company can choose only one project, which should it choose on the basis of profitability index? Complete this question by entering your answers in the tabs below. Required A Required B Required C Compute each project's net present value. Net Cash Flows Present Value of Present Value of Net 1 at 4% Cash Flows Project X1 Year 1 $ 25,000 Year 2 35,500 Year 3 60,500 0.8890 Totals $ 121,000 $ 0 Initial investment (80,000) Net present value $ (80,000) Project X2 Year 1 Year 2 Year 3 Totals…

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