Perit Industries has $150,000 to invest. The company is trying to decide between two alternative uses of the funds. Thealternatives are:Project AProject B$0Cost of equipment required$ 150,000$0$ 150,000Working capital investment requiredAnnual cash inflows$ 24,000$ 8,500Salvage value of equipment in six years$ 37,000$0yearsLife of the project6 years6The working capital needed for project B will be released at the end of six years for investment elsewhere. Perit Industries'discount rate is 15%.Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using tables.Required:1. Compute the net present value of Project A. (Enter negative values with a minus sign. Round your final answer to thenearest whole dollar amount.)2. Compute the net present value of Project B. (Enter negative values with a minus sign. Round your final answer to thenearest whole dollar amount.)3. Which investment alternative (if either) would you recommend that the company accept?

Net present value (NPV) of an alternative/project refers to the variance between the initial…

Required: 1. Compute the net present value of Project A. (Enter negative values with a minus sign. Round your final answer to the nearest whole dollar amount.) 2. Compute the net present value of Project B. (Enter negative values with a minus sign. Round your final answer to the nearest whole dollar amount.) 3. Which investment alternative (if either) would you recommend that the company accept?

Required: 1. Compute the net present value of Project A. (Enter negative values with a minus sign. Round your final answer to the nearest whole dollar amount.) 2. Compute the net present value of Project B. (Enter negative values with a minus sign. Round your final answer to the nearest whole dollar amount.) 3. Which investment alternative (if either) would you recommend that the company accept?

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 Kosovski Company is considering Projects S and L, whose cash flows are shown below. These projects are mutually exclusive, equally risky, and are not repeatable. If decision is made by choosing the project with the higher IRR, how much value will be forgone? Note that under some conditions choosing projects on the basis of the IRR will cause $0.00 value to be lost. WACC: CFS CFL a. $35.69 b. $29.26 c. $31.31 d. $26.33 e. $34.82 6.25% 0 -$1,050 -$1,050 1 $675 $360 2 $650 $360 3 $360 4 $360
20)
A tire manufacturing firm is considering Projects S and L, whose cash flows are shown below. These projects are mutually exclusive, equally risky, and not repeatable. What is the cost of capital at which the decision to take project L (or S) based on NPV will contradict the decision based on IRR method? Hint: Calculate the crossover rate and explain how the crossover rate would influence your decision to take project L or project S based on NPV vs. IRR? Show your excel work and thoroughly explain your answer. See cash flows below: Year 0 1 2 3 4 Project L: CFL -$2,050 $770 $780 $790 $795 Project S: CFS -$4,300 $1,300 $1,510 $1,520 $1,530
question 15. Three Sisters & Co. is considering Projects S and L, whose cash flows are shown below. These projects are mutually beneficial exclusive, equally risky, and not repeatable. If the decision is made by choosing the project with the higher IRR, how much value will be forgone? No that no change in value may exists if there is no conflict in decisions, that is choosing same project under both methods. Furthermore, projects could also have been rejected in the very first place. WACC:8.25% Year 0 1 2 3 4 CFS -$1,225 $650 $ 450 $ 250 $50 CFL -$1,315 $100 $300 $500 $700 -$13.21/ -$24.41/$0.00/$24.41/-55.63/$13.21/$60.00
A company has unlimited funds to invest at its discount rate. The company should invest in all projects having: Multiple Choice an internal rate of return greater than zero. a net present value greater than zero. a simple rate of return greater than the discount rate. a payback period less than the project's estimated life.
Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.
Nast Inc. is considering Projects S and L, whose cash flows are shown below. These projects are mutually exclusive, equally risky, and not repeatable. If the decision is made by choosing the project with the higher MIRR rather than the one with the higher NPV, how much value will be forgone? Note that under some conditions choosing projects on the basis of the MIRR will cause $0.00 value to be lost. O WACC: CFS CFL O a. $199.41 O b. $0.00 O c. $109.03 O d. $7.51 Oe. $8.32 10.75% 0 -$1,100 -$2,200 1 $375 $725 2 $375 $725 3 $375 $725 st 4 $375 $725
I need solutions for questions d, e, f, g, h and i. Thanks d. Are this project’s cash flows likely to be positively or negatively correlated withreturns on Cory’s other projects and with the economy, and should this matter in youranalysis? Explain.e. Unrelated to the new product, Cory is analyzing two mutually exclusive machines thatwill upgrade its manufacturing plant. These machines are considered average-riskprojects, so management will evaluate them at the firm’s 10% WACC. Machine Xhas a life of 4 years, while Machine Y has a life of 2 years. The cost of each machineis $60,000; however, Machine X provides after-tax cash flows of $25,000 per year for4 years and Machine Y provides after-tax cash flows of $42,000 per year for 2 years. Themanufacturing plant is very successful, so the machines will be repurchased at the endof each machine’s useful life. In other words, the machines are “repeatable” projects.1. Using the replacement chain method, what is the NPV of the better machine?2.…
Which of the following statements is most FALSE? A. If a project with normal cash flows has a positive NPV, it will definitely have an MIRR greater than the cost of capital. B. If a project with normal cash flows has an IRR that is greater than the cost of capital, then taking on that project would decrease the value of the firm. C. If a project has normal cash flows, then the MIRR has to be between k and IRR if the project has positive interim cash flows (cash flows between t=0 and the end of the project). D. If a project with normal cash flows does not have any interim cash flows, the project's IRR will equal the project's MIRR. E. Multiple IRRS can exist for a project if the project has nonnormal cash flows. OA OB OC
Which of the following statements is true? O The salvage value of new equipment should not be considered when using the internal rate of return method to evaluate a project. O The internal rate of return method assumes that the cash flows generated by a project are reinvested at a rate of return that equals the company's cost of capital. O The profitability index and the internal rate of return will always result in the same preference ranking for investment projects. O In calculating the profitability index, the initial investment in the project should be reduced by any proceeds from the sale of old equipment. O None of the above statements is true.
5. I need help with multiple choice finance home work question If a project has a NPV of zero, the project: Has a discounted payback period that is shorter than the life of the project. Has a profitability index that is greater than one. Should be accepted even if the firm has alternative investments with a positive NPV. Should be rejected. Is expected to earn a return equal to the firm's required return.
Two investment projects are under analysis and, due to budget constraints, only one of them can be selected. The investor should select the project: a. Based on absolute metric of value b. With higher internal rate of returnc. With lower discounted payback period

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