Question: Selma Inc. is comparing several alternative capital budgeting projects as shown below: Projects Initial investment A ☐ B C $80,000 $120,000 $160,000 Present value of net cash flows 90,000 110,000 200,000 Required: Using the profitability index, how many of the projects are acceptable? a) 2 b) 0 c) 1 d) 3
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- Start with the partial model in the file Ch10 P23 Build a Model.xlsx on the textbooks Web site. Gardial Fisheries is considering two mutually exclusive investments. The projects expected net cash flows are as follows: a. If each projects cost of capital is 12%, which project should be selected? If the cost of capital is 18%, what project is the proper choice? b. Construct NPV profiles for Projects A and B. c. What is each projects IRR? d. What is the crossover rate, and what is its significance? e. What is each projects MIRR at a cost of capital of 12%? At r = 18%? (Hint: Consider Period 7 as the end of Project Bs life.) f. What is the regular payback period for these two projects? g. At a cost of capital of 12%, what is the discounted payback period for these two projects? h. What is the profitability index for each project if the cost of capital is 12%?Net present value method, present value index, and analysis for a service company First United Bank Inc. is evaluating three capital investment projects by using the net present value method. Relevant data related to the projects are summarized as follows: Instructions 1. Assuming that the desired rate of return is 15%, prepare a net present value analysis for each project. Use the present value table appearing in Exhibit 2 of this chapter. 2. Determine a present value index for each project. (Round to two decimal places.) 3. Which project offers the largest amount of present value per dollar of investment? Explain.Blue Spruce Inc. is comparing several alternative capital budgeting projects as shown below: Initial investment Present value of net cash flows O C.B.A OA.C.B. OC.A.B. OAB.C. A Save for Later $102000 112000 Using the profitability index, the projects rank as Projects B $142000 $182000 222000 132000 C & Attempts: 0 of 1 used Submit Answer PriSc
- Consider the following projects: Cash Flows ($) Project D E CO00 C101 -11,700 23,400 -21,700 37,975 Assume that the projects are mutually exclusive and that the opportunity cost of capital is 12%. a. Calculate the profitability index for each project. b-1. Calculate the profitability-index using the incremental cash flows. b-2. Which project should you choose?Appelbaum Inc. is comparing several alternative capital budgeting projects as shown below: Projects A B C Initial investment $80,000 $120,000 $160,000 Present value of net cash flows 90,000 110,000 200,000 Using the net present value, how many of the projects are available?? Group of answer choicesYou are analyzing two proposed capital investments with the following cash flows: Year Project X Project Y 0 - $20,000 - $20,000 1 12,630 7,470 2 5,660 7,470 3 6,360 7,470 4 1,920 7,470 The cost of capital for both projects is 10 percent.Calculate the profitability index (PI) for each project. (Do not round discount factors. Round intermediate calculations to 2 decimal places, e.g. 15.25 and final answer to 4 decimal places, e.g. 1.2527.) - The PI for project X is and the PI for project Y is . - Which project or projects should be accepted if you have unlimited funds to invest? ( Project x, Project Y, Neither Project, Both Projects) - Whch project should be accepted if they are mutually exclusive? (Project X, Project Y, or neither project)
- Consider the following projects: Cash Flows ($) Co Project D E -11, 100 -21, 100 C₁ 22, 200 34,500 Assume that the projects are mutually exclusive and that the opportunity cost of capital is 11%. a. Calculate the profitability index for each project. b-1. Calculate the profitability-index using the incremental cash flows. b-2. Which project should you choose?Comparing Investment Criteria [L01,2,3,5,7] Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 -$300,000 -$40,000 1 20,000 19,000 2 50,000 12,000 3 50,000 18,000 4 390,000 10,500 Whichever project you choose, if any, you require a 15 per cent return on your investment. a. If you apply the payback criterion, which will you choose? Why? b. If you apply the discounted payback criterion, which investment will you choose? Why? c. If you apply the NPV criterion, which investment will you choose? Why? d. If you apply the IRR criterion, which investment will you choose? Why? e. If you apply the profitability index criterion, which investment will you choose? Why? f. Based on your answers in (a) through (e), which project will you finally choose? Why? Please explain your calculations and conclusionsQ3) Based on the information below which projects will we choose based on weighted average profitabiltity Index if we only have OMR500,000 to invest? Select one: Project NPV Investment PI A 130,000 200,000 B 241,250 225,000 C 294,250 275,000 D 262,000 250,000
- The cash flows associated with an investment project are as follows: Project Y (200 000) Year 1 100 000 2 100 000 3 120 000 4 110 000 The discount rate is 8 percent. What's the discount payback period of the projects? (compile a spreadsheet) Calculate NPV, PI of a projects Calculate IRR of a projects Should the firm accept the project? a) b) c) d)Profitability index. Given the discount rate and the future cash flow of each project listed in the following table, . use the Pl to determine which projects the company should accept. What is the Pl of project A? i Data Table (Round to two decimal places.) (Click on the following icon o in order to copy its contents into a spreadsheet.) Cash Flow Project A -%241,900,000 $150,000 $350,000 Project B Year 0 $2,300,000 $1,150,000 $950 000 $750,000 $550,000 Year 1 Year 2 Year 3 $550,000 Year 4 $750,000 $950,000 4% Year 5 $350.000 Discount rate 18% Print DoneConsider the following two mutually exclusive projects:Year Cash Flow (X) Cash Flow (Y)0 -$365,000 -$38,0001 25,000 16,0002 65,000 12,0003 65,000 17,0004 425,000 15,000Whichever project you choose, if any, you require a 13 percent return on your investment. i. Which investment will you choose if you use the payback decision criteria? Justify your answer.ii. Which investment will you choose if you use the NPV decision criteria? Justify your answer.iii. Which project will you choose ultimately based on your answers above?
