Quentin, a Financial Manager, has been approached by five different subsidiaries cach ofwhom are recommending investment in a new business line. Quentin has estimated therelevant cash flows in the table below and is presenting his results to the Board for approval.For each project he has estimated the present value of the cost of the project and also thepresent value of future income flows. The five projects are all divisible and the companyuses 12% as the discount rate for projects of this nature.ProjectCost (£)240,000330,000270,000375,000210,000PV (£)315,000343,500390,000345,000300,000BDa)Explain the differences and similarities between net present value (NPV) and theprofitability index (P).Calculate the profitability index for each of the five projects and rank the projects inthe order of preference that would maximise shareholders wealth.b)c)Calculate the NPV for each of the five projects and rank the projects in the order ofpreference that would maximise sharcholders wealth.Assume that the Board has limited total investment to £1,200,000. Which, if any,projects would you recommend for investment? Explain your answer.d)

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Quentin, a Financial Manager, has been approached by five different subsidiaries cach of whom are recommending investment in a new business line. Quentin has estimated the relevant cash flows in the table below and is presenting his results to the Board for approval. For each project he has estimated the present value of the cost of the project and also the present value of future income flows. The five projects are all divisible and the uses 12% as the discount rate for projects of this nature. company Project Cost (£) 240,000 330,000 270,000 375,000 210,000 PV (£) 315,000 343,500 390,000 345,000 300,000 C D E a) Explain the differences and similarities between net present value (NPV) and the profitability index (PI). Calculate the profitability index for cach of the five projects and rank the projects in the order of preference that would maximise shareholders wealth. b) Calculate the NPV for cach of the five projects and rank the projects in the order of preference that would maximise sharcholders wealth. c)

Quentin, a Financial Manager, has been approached by five different subsidiaries cach of whom are recommending investment in a new business line. Quentin has estimated the relevant cash flows in the table below and is presenting his results to the Board for approval. For each project he has estimated the present value of the cost of the project and also the present value of future income flows. The five projects are all divisible and the uses 12% as the discount rate for projects of this nature. company Project Cost (£) 240,000 330,000 270,000 375,000 210,000 PV (£) 315,000 343,500 390,000 345,000 300,000 C D E a) Explain the differences and similarities between net present value (NPV) and the profitability index (PI). Calculate the profitability index for cach of the five projects and rank the projects in the order of preference that would maximise shareholders wealth. b) Calculate the NPV for cach of the five projects and rank the projects in the order of preference that would maximise sharcholders wealth. c)

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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There are two projects under consideration by the Rainbow factory. Each of the projects will require an initial investment of $34,000 and is expected to generate the following cash flows: First Year Second Year Third Year Total Alpha Project $32,000 $22,000 $5,000 $59,000 Beta Project 8,000 23,500 28,000 59,500 Present value and future values table: https://openstax.org/books/principles-managerial-accounting/pages/time-value-of-money A. If the discount rate is 12%, compute the NPV of each project. Round your present value factor to three decimal places and final answer to answer to 2 decimal places. Alpha Project $_________ Beta Project $________ B. Which project should be recommended. _____________
Walsh Company is considering three independent projects, each of which requires a $3 million investment. The estimated internal rate of return (IRR) and cost of capital for these projects are presented here: Project H (high risk): Cost of capital Project M (medium risk): Project L (low risk): Cost of capital Cost of capital = 15% = 11% = 8% IRR = 19% IRR = 12% IRR = 7% Note that the projects' costs of capital vary because the projects have different levels of risk. The company's optimal capital structure calls for 50% debt and 50% common equity, and it expects to have net income of $4,443,000. If Walsh establishes its dividends from the residual dividend model, what will be its payout ratio? Round your answer to two decimal places. %
Greater Findlay Development Consortium is preparing to open a new retail strip mall and have multiple businesses that would like lease space in it. Each business will pay a fixed amount of rent plus a percentage of the gross sales generated each year. The cash flows from each of the businesses has approximately the same amount of risk. The business names, annual expected cash flows, and initial capital outflow for each of the businesses that would like to lease space in the strip mall are provided below. Greater Findlay Development Consortium uses a 12% hurdle rate which is its cost of capital. All business will be evaluated based on 4-year term because the contract will expire in four years. Video Now Apple Garden Croger Mart Horizon Wireless Initial Capital Outlay ($200,000) ($298,000) ($248,000) ($272,000) Annual Net Cash Flows Year 1 65,000 100,000 80,000…
11-24. Peter Piper’s Pies (P3) is evaluating four independent investments. The cost of each project is $214,000. The internal rates of return (IRRs) for the projects are its — 19%, IRR2 ' 15%, IRR3 — 18%, and IRR4 - 14%. P3’s investment banker has provided the following WACC table: Which project(s) should P purchase?
Walsh Company is considering three independent projects, each of which requires a $5 million investment. The estimated internal rate of return (IRR) and cost of capital for these projects are presented here: Project H (high risk): Project M (medium risk): Cost of capital = 15% Cost of capital = 13% Project L (low risk): Cost of capital = 7% IRR = 8% Note that the projects' costs of capital vary because the projects have different levels of risk. The company's optimal capital structure calls for 35% debt and 65% common equity, and it expects to have net income of $11,329,500. If Walsh establishes its dividends from the residual dividend model, what will be its payout ratio? Round your answer to two decimal places. % IRR = 22% IRR = 12%
Wilson Bryant Air Conditioning, a Middle Georgia HVAC company, wanted to build a web-based project tracking for all small HVAC companies in Middle Georgia. Wilson Bryant Air Conditioning asked SunTrust Bank for a loan of $5 million presenting their idea. They had an agreement with the SunTrust that they will repay the loan by allocating 80% of the company's profits each year for the first 4 years to SunTrust. In the fifth year, the company will pay the remaining balance on the loan in cash. The company assumes that it will not earn any profit in the first year. Also, the company anticipates that the profits will be $1.5 million per year in years 2 through 4. If the SunTrust accepts the deal at an interest rate of 14% per year, and the company's plan will work to perfection, what is the projected amount of the last loan payment (in year 5)? Draw the cash flow diagram.
The Fritz Co. is considering a new project and asked the chief accountant to review potential changes to the net working capital accounts should the project be adopted. The accountant’s report is as follows: Current Projected Inventory $ 99,218 $ 75,000 Accounts receivable $ 89,430 $110,000 Accounts payable $ 58,640 $ 50,000 What amount should be included in the initial cash flow of the project for net working capital?
Fernando Constantia, an engineer at Brandy River Vineyards, has a $100,000 budget for winery improvements. He has identified four investments, all of five years' duration, which have the cash flows shown in the accompanying table. Assuming the four investments are independent, use the IRR method to select which, if any, should be chosen. Use a MARR of 8 percent. 0 - $100,000 - $100,000 2 $24,800 $10,200 $50,000 $0 - $100,000 - $100,000 Give the IRR for each alternative and indicate whether or not it is acceptable. Alternative A Alternative A B C D B с D IRR % % % 1 $24,800 $5,100 $50,000 $0 Acceptable ▼ % (Round to three decimal places as needed.) 3 $24,800 $20,400 $10,000 $0 4 $24,800 $40,800 5 $24,800 $81,600 $0 $0 $0 $1,000,000
Thankyou for answering the first half of the question can you please solve the last reminding subpart which is B) the project payback period for Project B and state which project is preferred according to the method and question C )
Tasty Doughnuts has computed the net present value for capital expenditure at two locations. Relevant data related to the computation are as follows: Des Moines Cedar Rapids Total present value of net cash flow $194,880 $254,100 Amount to be invested (203,000) (242,000) Net present value $(8,120) $12,100 a. Determine the present value index for each proposal. Round your answers for the present value index to two decimal places. Des Moines Cedar Rapids Total present value of net cash flow $fill in the blank 1 $fill in the blank 2 Amount to be invested $fill in the blank 3 $fill in the blank 4 Present value index fill in the blank 5 fill in the blank 6 b. Which location does your analysis support? (If both present value indexes are the same, either location will grade as correct.) , because the net present value index is 1.
Sunshine Corporation is reviewing an investment proposal. The initial cost of the investment is R52 500. The estimated cash flows and net profit for each year are presented in the schedule below. All cash flows are assumed to take place at the end of the year. Year Net cash flows Net profit1 R20 000 R2 5002 R17 500 R3 5003 R15 000 R4 5004 R12 500 R5 5005 R10 000 R6 500 The cost of capital is 12%.Required:Calculate the following:1. Payback Period 2. Net Present value 3. Accounting rate of return

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