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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A4 9a We find the following information on NPNG (No-Pain-No-Gain) Inc.: A4 9a EBIT = $2,000,000Depreciation = $250,000Change in net working capital = $100,000Net capital spending = $300,000 These numbers are projected to increase at the following supernormal rates for the next three years, and 5% after the third year for the foreseeable future: EBIT: 20%Depreciation: 10%Change in net working capital: 15%Net capital spending: 10% The firm’s tax rate is 35%, and it has 1,000,000 outstanding shares and $8,000,000 in debt. We have estimated the WACC to be 15%. a. Calculate the EBIT, Depreciation, Changes in NWC, and net capital spending for the next four years.
11. Imperial Systems has $1 million available for capital investments during the currentyear. A list of possible investment projects, together with their net investments andnet present values, is provided in the following table:Project Net Investment Net Present Value1 $200,000 $20,0002 500,000 41,0003 275,000 60,0004 150,000 5,0005 250,000 20,0006 100,000 4,0007 275,000 22,0008 200,000 –18,000a. Rank the various investment projects in terms of their profitability indexes(computed to three decimal places).b. In the order of decreasing profitability index values and considering thecapital constraints, which projects should be adopted? Are all capital fundsexpended?c. Is there another combination that produces a higher aggregate net presentvalue than the one developed in part b?d. If less than the entire amount of available funds is invested, what is theopportunity cost of the unused funds?
IRR and NPV A company is analyzing two mutually exclusive projects, S and L, with *the following cash flows: 1 2 3 4 Project S -$1,000 $900 $250 $250 $10 $400 $10 Project L -$1,000 $0 $800 The company's WACC is 10 percent. What is the IRR of the better project? (Hint: Note that the better project may or may not be the one with the higher IRR.)
After-tax cash flows: Year 1 2 3 4 Project Alpha R 37 000 72 400 246 000 Project Omega R 72 000 72 000 72 000 72 000 Both projects require an initial investment of R235 400 and the cost of capital is 12%. As the project manager of Delta Construction Ltd. you are required to: 1.2.1 Calculate the Net Present Valub (NPV) for both projects. 1.2.2 Recommend, with reasons which project should be chosen
Please answer the following MCQs and T or Fs from 1 till 14
Problem 8-23 Profitability Index (LO3) Consider the following projects: Project A Co -$ 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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QUESTION ONE You are a senior manager at Zambia Airways and have been authorized to spend up to K400,000 for projects. The three projects you are considering have the following characteristics: Project Project A Details Initial investment of K280,000. Cash flow of K190,000 at year 1 and K170,000 at year 2. This is a plant expansion project. Initial investment of K390,000. Cash flow of K270,000 at year 1 and K240,000 at year 2. This is a new product development project. Initial investment of K230,000. Cash flow of K160,000 at year 1 and K190,000 at year 2. This is a market expansion project. Project B Project C Assume the corporate discount rate is 10 percent, please offer your recommendations by ranking the projects, backed by your analysis using: (i) Net Present Value (ii) Profitability Index (iii) Payback period, and (iv) Critique the flaws of each technique. [6 marks] [5 marks] [3 marks] [6 marks] Total [20 marks]
None
Answer all the questions QUESTION 1 Questions a. After-tax cash flows for two mutually exclusive projects (with economic lives of four years each) are: Y Year Project X Project K(12,000) 5,000 01234 5,000 5,000 5,000 i. ii. iii. K(12,000) 0 0 0 25,000 The company's cost of capital is 10 percent. Compute the following: The internal rate of return for each project. The net present value for each project. Which project should be selected? Why? b. A firm is considering the purchase of an automatic machine for K6,200. The machine has an installation cost of K800 and zero salvage value at the end of its expected life of five years. Depreciation is by the straight-line method with the half-year convention. The machine is considered a five-year property. Expected cash savings before tax is K1,800 per year over the five years. The firm is in the 40 percent tax bracket. The firm has determined the cost of capital (or minimum required rate of return) as 10 percent after taxes. Should the firm…
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Aa 27.

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