Pitt Company is considering two alternative Investments. The company requires a 12% return from its Investments. Neither option has a salvage value.Project X Project Y$243,046$175,883Initial InvestmentNet cash flows anticipated:Year 1Year 2Year 3Year 4Year 582,00060,00091,00082,00075,000A. Compute the IRR for both projects using the IRR spreadsheet function.Project XProject YB. Which project should be recommended.Project X✓%%35,00054,00073,00069,00026,000

IRR stands for Internal Rate of Return, which is a financial metric used to calculate the potential…

Pitt Company is considering two alternative Investments. The company requires a 12% return from its Investments. Neither option has a salvage value Project X Project Y $243,046 $175,883 Initial Investment Net cash flows anticipated: Year 1 Year 2 Year 3 82,000 60,000 91,000 82,000 75,000 A. Compute the IRR for both projects using the IRR spreadsheet function. Project x Project Y Year 4 Year 5 35,000 54,000 73,000 69,000 26,000 %

Pitt Company is considering two alternative Investments. The company requires a 12% return from its Investments. Neither option has a salvage value Project X Project Y $243,046 $175,883 Initial Investment Net cash flows anticipated: Year 1 Year 2 Year 3 82,000 60,000 91,000 82,000 75,000 A. Compute the IRR for both projects using the IRR spreadsheet function. Project x Project Y Year 4 Year 5 35,000 54,000 73,000 69,000 26,000 %

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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Spiritlight Ventures is considering the following investment: Investment $140,000 Annual revenues $ 96,000 Annual variable costs $ 32,000 Annual fixed out-of-pocket costs $ 20,000 Salvage value $ 12,000 Discount rate 12% Expected life of project 8 years Ignore income taxes. The present value of the annual cash flow (rounded) is a.$152,538. b.$136,822. c.$204,884. d.$218,592.
NPV versus IRR Consider the following cash flows on two mutually exclusive projects for the Bahamas Recreation Corporation (BRC). Both projects require an annual return of 14 percent. Deepwater Fishing -$725,000 270,000 420,000 380,000 Year 0 1 2 3 New Submarine Ride -$1,450,000 820,000 650,000 540,000 As a financial analyst for BRC, you are asked the following questions: a. If your decision rule is to accept the project with the greater IRR, which project should you choose? b. Because you are fully aware of the IRR rule's scale problem, you calculate the incremental IRR for the cash flows. Based on your computation, which project should you choose? c. To be prudent, you compute the NPV for both projects. Which project should you choose? Is it consistent with the incremental IRR rule?
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n/takeAssignment/takeAssignmentMain.do?invoker=&takeAssignmentSession Locator=&inprogress=false eBook Pitt Company is considering two alternative investments. The company requires a 12% return from its investments. Neither option has a salvage value. Project X Project Y $242,311 Initial investment Net cash flows anticipated: Year 1 Year 2 82,000 58,000 93,000 81,000 75,000 A. Compute the IRR for both projects using the IRR spreadsheet function. Project X Project Y B. Which project should be recommended. Year 3 Year 4 Year 5 Project X Feedback Check My Work % 2 % $175,063 C Remember that all amounts need to be used in the formula in Excel. Follow the examples given for using the formula using the Help function in Excel. Compare the two amounts you calculate. Which amount would be better over the other? A 35,000 54,000 72,000 67,000 28,000 A 76 00 Incognito Aa TH 3
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INFORMATION The management of Mastiff Enterprises has a choice between two projects viz. Project Cos and Project Tan, each of which requires an initial investment of R2 500 000. The following information is presented to you: PROJECT TAN 5.1 5.2 5.3 Year 5.4 1 5.5 2 3 5 PROJECT COS Net Profit R 130 000 130 000 130 000 130 000 130 000 Net Profit R 80 000 A scrap value of R100 000 is expected for Project Tan only. The required rate of return is 15%. Depreciation is calculated using the straight-line method. 180 000 Use the information provided above to calculate the following. Where applicable, use the present value tables provided in APPENDICES 1 and 2 that appear after QUESTION 5. 120 000 220 000 50 000 Payback Period of Project Tan (expressed in years, months and days). Net Present Value of Project Tan. Accounting Rate of Return on average investment of Project Tan (expressed to two decimal places). Benefit Cost Ratio of Project Cos (expressed to three decimal places). Internal Rate of…
Cowen Collins recently invested in a project that promised an internal rate of return of 15 percent. If the project has an expected annual cash inflow of $12,000 for six years, with no salvage value, how much did Cowen pay for the project? Present value tables or a financial calculator are required. Select one: a. $72,000 b. $35,000 c. $31,708 d. $45,414
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