Required: (Evaluate the projects using each of the following criteria, stating which project(s) Micron Industries should choos e under each criteria andwhy: Payback Discounted Payback il. Net Present Value IV Profitability Index
Required: (Evaluate the projects using each of the following criteria, stating which project(s) Micron Industries should choos e under each criteria andwhy: Payback Discounted Payback il. Net Present Value IV Profitability Index
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
Related questions
Question
Only A i - iv
Hence, the weighted average cost of capital (WACC) : 0.0772 or 7.72%
Transcribed Image Text:Question 5
Based on the Weighted Average Cost of Capital calaulatedin question 4, Micron Industries decides,
based on the risk profile of projects A and B, to use a required return of 15%.
Youhave been tasked with evaluating the quantitative aspects of the projects, which are mutually
exclusive. The projected cashflows of both projects are as follows:
Project
Yeas
-2250000
-3750000
S00000
1000000
2
750000
2000000
800000
2000000
1400000
2000000
As noted above, the company has a required rate of return of 15%. The following PV factors are
provided
PV Factor
Year
(15%)
0.8G96
12
0.7562
0.6575
4
0.5718
Required:
(Evaluate the projects using each of the following criteria, stating which project(s) Micron
industries should choos e under each criteria andwhy:
| Payback
ii Discounted Payback
ili
Net Present Value
Profitability Index
IV.
(b) Compute the Internal Rate of Return (IRR) for the ProjectA only given that it falls between 15%
and 18%. The PV Factors for 18% are provided below
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