Rank these non-mutually exclusive alternatives if other opportunitiesexist to earn a before-tax minimum rate of return of 10%. Values arein thousands of dollars.A)B)C)-3000-5000-2000-200130011501100-2502-1502-5002550-300335036003600 600 600456450550456004

Capital budgeting is the process of dedicating the company's resources to projects that are…

Answered: Rank these non-mutually exclusive…

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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The Michner Corporation is trying to choose between the following two mutually exclusive design projects: Year Cash Flow (1) Cash Flow (II) 0 123 -$ 73,000 33,000 33,000 3 33,000 -$ 17,100 9,250 9,250 9,250 a-1.If the required return is 11 percent, what is the profitability index for both projects? (Do not round intermediate calculations and round your answers to 3 decimal places, e.g., 32.161.) Project I Project II - If the company applies the profitability index decision rule, which project should the 2. firm accept? O Project I O Project II b- What is the NPV for both projects? (A negative answer should be indicated by a 1. minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) Project I Project II
Company X is considering two investment options. Both options require an investment-$400,000. Option 1: Expected rate of return - 12.0%, tax rate - 20.0 % Option 2: Expected rate of return - 9.0%, tax rate - 25.0% Compute the DIFFERENCE in before tax income between the two options O Option 1 exceeds Option 2 by $14,000 O Option 1 exceeds Option 2 by $12,000 None of the other answers are correct exceeds Option 2 by $10,000 O Option 1 O Option 2 exceeds Option 1 by $10,000
The Michner Corporation is trying to choose between the following two mutually exclusive design projects: Year Cash Flow (1) Cash Flow (II) -$ -$ 0 55,000 1 25,000 2 25,000 3 25,000 a-1. If the required return is 10 percent, what is the profitability index for both projects? (Do not round intermediate calculations and round your answers to 3 decimal places, e.g., 32.161.) Project I Project II 18,900 10,150 10,150 10,150 a- If the company applies the profitability index decision rule, which project should the 2. firm accept? Project I O Project II Project I Project II 1. b- What is the NPV for both projects? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
3. Lopez Industries has identified the following two mutually exclusive capital investment projects: Year Project A Project B 0 1 2 3 4 -16000 400 800 13000 -15500 12500 8000 800 14000 800 What is the IRR for each of these projects? If you apply the IRR decision rule, which project should the company accept? Is this decision necessarily correct? If the required return is 11%, what is the NPV for each of these projects? Which project should the firm accept if they apply the NPV rule?
Two alternatives are being considered: B First cost Uniform annual benefit Useful life, in 5000 9600 1750 1850 4 8 years If the minimum attractive rate of return is 7%, which alternative should be selected? Solution: 1. Use the increment analysis, we should use 2. Terms n= 3. The Increment CFD has 3 basic patterns: O AP= O AA= O AF= occurred at end of year 4. AROR= % 5. Choose Please answer all parts of the question.
Assume a firm has EBAT of $590,000, and no amortization. It is in a 40 percent tax bracket. a. Compute its cash flow. $ 354,000 b. Assume it has $590,000 in amortization. Recompute its cash flow. $ 590,000 c. How large a cash flow benefit did the amortization provide? $T] Cash flow Cash flow Benefit in cash flow
Given the financial data in the table below for two mutually exclusive alternatives, determine the value "X" for the two alternatives to be equally attractive. Use an interest rate of 12% per year. Q Initial cost $2,500 $4,000 Annual benefit 400 Life
5. Koral Corporation can invest in a project that costs $400,000. The projectisexpectedtohaveanafter-taxreturnof$250,000ineachof years 1 and 2. Koral normally uses a 10 percent discount rate to evaluate projects but feels it should use 12 percent to compensate for inflation.Howmuchdifferencedoestheratemakeintheafter-taxnet present value of the project? a. S50,000 b. $22,500 c. $20,000 d. S11,250
1- Find the internal rate using the method of Internal Rate of Return (IRR) if i= 15%, for the table shown below. If the initial cost is (220,000 U) Cost (U) 350 380 400 500 550 470 780 650 690 450 Revenue 0 0 500 1000 770 450 880 660 890 770 (U) 1 2 3 Year 4 5 6 7 8 9 10
2. In the figure below, Alternative C has a discounted payback period of approximately: years $50,000 S0 -550,000 -$100,000 -S150,000 -$200,000 A B -$250,000 E -5300,000 -$350,000 -$400,000 -$450,000 Investment Year Alternative A Altemative B Alternative C True or False 3. In the same figure above, Alternative C is the most profitable alternative at the end of the planning horizon 4. In the cash flow approach, I would be losing money if I don't sell the "defender" equipment

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Rank these non-mutually exclusive alternatives if other opportunities exist to earn a before-tax minimum rate of return of 10%. Values are in thousands of dollars. A) B) C) -300 0 -500 0 -200 0 -200 1 300 1 150 1 100 -250 2 -150 2 -500 2 550 -300 3 350 3 600 3 600 600 600 4 5 6 450 550 4 5 600 4