Problem 10.32 Jekyll & Hyde Corp. is evaluating two mutually exclusive projects. The cost of capital is 15 percent. Costs and cash flows are given in the following table. Year Project 1 Project 2 -$1,276,369 -$1,164,680 1 270,450 338,030 2 348,460 338,030 3 471,960 338,030 4 506,200 338,030 5 729,300 338,030 Calculate NPV and IRR of two projects. (Enter negative amounts using negative sign, e.g. -45.25. Round answer to 2 decimal places, e.g. 15.25 or 12.25%.) NPV of project 1 is $ NPV of project 2 is $[ IRR of project 1 is IRR of project 2 is Which project should be accepted? Jekyll and Hyde Corp. should accept neither project project 1 project 2 Click if you would like to Show Wi ion: Open Show Work

Problem 10.32 Jekyll & Hyde Corp. is evaluating two mutually exclusive projects. The cost of capital is 15 percent. Costs and cash flows are given in the following table. Year Project 1 Project 2 -$1,276,369 -$1,164,680 1 270,450 338,030 2 348,460 338,030 3 471,960 338,030 4 506,200 338,030 5 729,300 338,030 Calculate NPV and IRR of two projects. (Enter negative amounts using negative sign, e.g. -45.25. Round answer to 2 decimal places, e.g. 15.25 or 12.25%.) NPV of project 1 is $ NPV of project 2 is $[ IRR of project 1 is IRR of project 2 is Which project should be accepted? Jekyll and Hyde Corp. should accept neither project project 1 project 2 Click if you would like to Show Wi ion: Open Show Work

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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9.6 Assume that you are the chief financial officer at Porter Memorial Hospital. The CEO has asked you to analyze two proposed capital investments—project X and project Y. Each project requires a net investment outlay of $10,000, and the opportunity cost of capital for each project is 12 percent. The projects’ expected net cash flows are as follows: Year Project X ($) Project Y ($) 0 (10,000) (10,000) 1 6,500 3,000 2 (3,000 3,000 3 3,000 3,000 4 1,000 3,000 Calculate each project’s payback, NPV, and IRR. Which project (or projects) is financially acceptable? Explain your answer.
11-12 IRR and NPV A company is analyzing two mutually exclusive projects, S and L, with the following cash flows: 1 3 4 Project S -$1,000 Project L -$1,000 $900 $0 $250 $10 $400 $10 $800 $250 The company's WACC is 10 percent. What is the IRR of the better project? (Hint: Note that the better project may or may not be the one with the higher IRR.)
QUESTION 14 You have a total of $30,000 to invest in a project and are considering the following three projects: Cash Flows Project A ($30,000) $8,500 Year Project B ($30,000) $19,600 Project C ($30,000) $10,400 1 $9,300 $17,300 $4,500 $10,400 $10,400 3. $10,400 4. $11,200 $4,200 $10,400 $12,300 $2,300 $10,400 If the cost of capital (discount rate) is 10%, which project(s) do you invest in and why? A. Project B- it will pay back the quickest OB. Project C- it generates the greatest cash flow C. Project A-it has the highest accounting rate of return D.Project B-it has the highest net present value E. Project A- it has the highest net present value OF. Project C- it has the highest profitability index
Q.No.2 Three independent projects, each of which requires a RS 5 million investment are being considered for investment purpose by Sona Tea Company. The cost of capital and estimated internal rate of return (IRR) for these projects are shown below: Project Cost of capital IRR A 16% 20% B 12% 10% C 8% 9% Company’s capital structure involves only debt and equity financing with the ratio of 50% each. The estimated net income from the selected projects is expected to be RS 7,287,500. What should be the dividend payout ratio If Sona tea company estimate its dividends based on the residual dividend model?
Year O 1 2 4 3 O $1.838.67 O $1.854.03 O $2,167.89 Given this information, and assuming that the relevant cost of capital for both projects is 9%. determine the net present value (NPV) for the project with the highest internal rate of return (IRR). O $2.105.21 Project A Cash Flow $10,000 00 $1,905.54 $ 3.000.00 $4,000.00 $5,000.00 $3,000.00 Project B Cash Flow $11,000 00 $5,000.00 $ 4,000.00 $4,000.00 $3,000.00
Year 0 2 Project A -$50,000 $24,200 $16,800 $46,500 Project B -$45,000 $39,000 $18,000 $18,000 Assume these projects are mutually exclusive and the cost of capital is 12.6%. Which of the following statements are true? A. The payback period of project A is 2.19 years. B. You'll accept project A since its NPV is about $872.85 greater than that of project B. C. You'll accept project B since its payback period is shorter than project A. D. Both (A) and (B) are true. E. Both (A) and (C) are true.
After-tax cash flows: Year 1 2 3 4 Project Alpha R 37 000 72 400 246 000 Project Omega R 72 000 72 000 72 000 72 000 Both projects require an initial investment of R235 400 and the cost of capital is 12%. As the project manager of Delta Construction Ltd. you are required to: 1.2.1 Calculate the Net Present Valub (NPV) for both projects. 1.2.2 Recommend, with reasons which project should be chosen
QUESTION 10 A company is considering two mutually exclusive projects that have the following cash flows: Project A Project B Year 0 1 2 3 4 Cash Flow -$10,000 1,000 2,000 6,000 6,000 Cash Flow $8,000 7,000 1,000 1,000 1,000 If the company's required rate of return is 10%, find the project's NPV, IRR, PI, and payback period. Which project they should invest in? B because it has the highest IRR of 15.71% O Abecause it has the highest Pl of 1 12 QUESTION 11 A because it has the highest NPV of 1,167 95 OB becasue it has the lowest payback of 2 years
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Problem 8-23 Profitability Index (LO3) Consider the following projects: Project A Co -$ 3,000 B -3,000 C₁ +$ 2,900 +2,340 C2 +$ 2,100 +1,908 a. Calculate the profitability index for A and B assuming a 24% opportunity cost of capital. Note: Do not round intermediate calculations. Round your answers to 4 decimal places. Answer is complete but not entirely correct. Profitability index Project A 1.2348 X B 1.0427 X b. According to the profitability index rule, which project(s) should you accept? Project A Project B O Both ☑ Neither
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