Rana Company has $12,000,000 to invest and wishes to evaluate the following three projects. Years A ($) B ($) C ($) 0 (5,000,000) (2,000,000) (7,000,000) 1 2,000,000 600,000 4,000,000 2 2,000,000 3,000,000 3 2,000,000 2,000,000 500,000 4 1,000,000 600,000 800,000 cost of capital 12% 12% 12% Required: Which project(s) would you recommend using: a. Payback Period (PP) in nominal and discounted values. b. Net Present Value (NPV) c. Profitability Index (PI) d. The internal rate of return (IRR) (hint: use 10% for X and 20% for the other projects)
Rana Company has $12,000,000 to invest and wishes to evaluate the following three projects. Years A ($) B ($) C ($) 0 (5,000,000) (2,000,000) (7,000,000) 1 2,000,000 600,000 4,000,000 2 2,000,000 3,000,000 3 2,000,000 2,000,000 500,000 4 1,000,000 600,000 800,000 cost of capital 12% 12% 12% Required: Which project(s) would you recommend using: a. Payback Period (PP) in nominal and discounted values. b. Net Present Value (NPV) c. Profitability Index (PI) d. The internal rate of return (IRR) (hint: use 10% for X and 20% for the other projects)
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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Question
Rana Company has $12,000,000 to invest and wishes to evaluate the following three projects.
|
Years |
A ($) |
B ($) |
C ($) |
|
0 |
(5,000,000) |
(2,000,000) |
(7,000,000) |
|
1 |
2,000,000 |
600,000 |
4,000,000 |
|
2 |
2,000,000 |
|
3,000,000 |
|
3 |
2,000,000 |
2,000,000 |
500,000 |
|
4 |
1,000,000 |
600,000 |
800,000 |
|
cost of capital |
12% |
12% |
12% |
Required:
Which project(s) would you recommend using:
a. Payback Period (PP) in nominal and discounted values.
b. Net Present Value (NPV)
c. Profitability Index (PI)
d. The internal rate of return (IRR) (hint: use 10% for X and 20% for the other projects)
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