Shaylee Corporation has $2.00 million to invest in new projects. The company's managers have presented a number of possible options that the board must prioritize. Information about the projects follows: Initial investment Present value of future cash flows Project A $ 435,000 785,000 Project B $ 250,000 435,000 Required: 1. Is Shaylee able to invest in all of these projects simultaneously? 2-a. Calculate the profitability index for each project. 2-b. What is Shaylee's order of preference based on the profitability index? Project C $ 740,000 1,220,000 Project D $ 965,000 1,580,000

Shaylee Corporation has $2.00 million to invest in new projects. The company's managers have presented a number of possible options that the board must prioritize. Information about the projects follows: Initial investment Present value of future cash flows Project A $ 435,000 785,000 Project B $ 250,000 435,000 Required: 1. Is Shaylee able to invest in all of these projects simultaneously? 2-a. Calculate the profitability index for each project. 2-b. What is Shaylee's order of preference based on the profitability index? Project C $ 740,000 1,220,000 Project D $ 965,000 1,580,000

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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Pecos Corporation is considering several investment proposals, as shown below: Investment required Present value of future net Investment Proposal OD, B, C, A O B, D, C, A OB, D, A, C O A, C, B, D A B $ 80,000 $ 100,000 C $ 60,000 D $ 75,000 cash flows $ 96,000 $ 150,000 $ 84,000 $ 120,000 If the project profitability index is used, the ranking of the projects from most to least profitable would be:
TWITTERCO has an opportunity to invest in two business initiatives: MUSK #1 & MUSK #2 Expected cash flow data for these two projects is shown below: M #1 M #2 -250 90 90 90 90 2022 2023 2024 2025 2026 -250 105 105 105 TwitterCo has a cost of capital for these projects of 11%. Calculate the NPV of these projects. Project M#1 NPV: Project M#2 NPV: Based on NPV, preferred is: If both projects can be undertaken, should they? If the projects are independent of each other, should they both be undertaken? If the projects are mutually exclusive of each other, should they both be undertaken?
Company is looking for opportunities to grow. Management is currently considering project proposals that will help expand the business. Several ventures were pre- screened and the team in-charge of evaluating proposals focused on two projects. The following data are given for two mutually exclusive project proposals: Project A Project B Initial Investment Annual Net Cash Inflows: Year 1 Year 2 Year 3 Year 4 Year 5 50,000.00 d) Internal Rate of Return e) Discounted Payback Period f) Profitability Index 15,000.00 14,000.00 12,000.00 12,000.00 12,000.00 60,000.00 30,000.00 14,000.00 10,000.00 10,000.00 10,000.00 Assuming that the firm's required rate of return is 20%, compute the following: a) Accounting Rate of Return b) Accounting Payback c) Net Present Value
The company is in search of resources for a new investment of TL 3,000,000. As a financial manager,a) Find the current weighted average cost of capital according to the resource distribution below.b) Discuss, what kind of financing strategy would you propose for the investment project in question.
Please complete these charts
Arnold Engineering has available two mutually exclusive investment proposals, A and B. Their net cash flows are as shown in the table over a 10-year planning horizon. MARR is 12%. Determine which alternative the decision maker should select using an external rate of return approach.
A real-estate development firm, Peterson and Johnson, is considering five possible development projects. Using units of millions of dollars, the following table shows the estimated long-run profit (net present value) that each project would generate, as well as the amount of investment required to undertake the project. Project 1 Project 2 Project 3 Project 4 Project 5 Estimated profit ($million) 1 1.8 1.6 0.8 1.4 Capital Required for Project ($million) Capital Available ($million) Project 1 Project 2 Project 3 Project 4 Project 5 Capital 6 12 10 4 8 20 Click here for the Excel Data File The owners of the firm, Dave Peterson and Ron Johnson, have raised $20 million of investment capital for these projects. Dave and Ron now want to select the combination of projects that will maximize their total estimated long-run profit (net present value) without investing more than $20 million. Formulate and solve this model on a spreadsheet. Determine the combination of…
Shaylee Corp has $2.10 million to invest in new projects. The company’s managers have presented a number of possible options that the board must prioritize. Information about the projects follows: Project A Project B Project C Project D Initial investment $ 720,000 $ 400,000 $ 960,000 $ 1,115,000 Present value of future cash flows 935,000 500,000 1,650,000 1,310,000 Required:1. Is Shaylee able to invest in all of these projects simultaneously?multiple choice No Yes 2-a. Calculate the profitability index for each project. (Round your answers to 4 decimal places.)
A company puts together a set of cash flow projections and calculates an IRR of 25% for the project. The firm's cost of capital is about 10%. The CEO maintains that the favorability of the calculated IRR relative to the cost of capital makes the project an easy choice for acceptance and urges management to move forward immediately. i. Should this project be evaluated using different standards? ii. How does the possibility of bankruptcy as a result of the project affect the analysis? iii. Are capital budgeting rules still appropriate?
XYZ Corporation: The data shown in the above table are for two mutually exclusive security projects that a company, called XYZ, is considering. Both projects are assumed to be strategically important to the company. Assume further the company’s cost of capital is 10%. year project A Project B 0 -200 -150 1 200 50 2 800 100 3 -800 150 Calculate the NPV of both projects. Calculate the Profitability Index for both projects. Calculate the IRR for both projects Which security project should XYZ invest in?
The following are the net cash flow estimates (in thousands of dollars) of the two (2) proposed projects, you are planning to invest in. Expected Net Cash Flow Year Restaurant & Bar Hardware $M $M 0 (200) (200) 1 10 70 2 60…
The senior management of Netherworld Ltd is evaluating four project proposals and will select one project to invest in. The following summary information is available: Project Code Initial Investment Required Net Present Value Project life (years) A 172,000 48,000 7 B 155,000 48,000 12 C 115,000 39,100 7 D 141,000 38,500 3 Required: Calculate the profitability index for each project. In order of preference, rank the four projects in terms of net present value and the profitability index. Which project do you think should be chosen?

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