Tesla Company uses a 12% hurdle rate for all capital expenditures. It screens investments using three evaluation techniques: the net present value, the profitability index and the internal rate of return. It has lined up four projects with the following information. Projects in thousands A B C D 400 596 496 544 Initial cash outflow Annual cash inflows Year 1 2 140 130 200 160 190 270 190 250 180 180 180 3 4 130 160 120 If Tesla Company has a capital budget of P1,500,000, what projects should be pursued base on the three criteria? Show necessary computations on your solution. (Present the projects to be accepted with the highest IRR to the least IRR (CAPITAL LETTER ONLY WITH NO SPACES PROVIDED (EX: A-B-C-D)
Tesla Company uses a 12% hurdle rate for all capital expenditures. It screens investments using three evaluation techniques: the net present value, the profitability index and the internal rate of return. It has lined up four projects with the following information. Projects in thousands A B C D 400 596 496 544 Initial cash outflow Annual cash inflows Year 1 2 140 130 200 160 190 270 190 250 180 180 180 3 4 130 160 120 If Tesla Company has a capital budget of P1,500,000, what projects should be pursued base on the three criteria? Show necessary computations on your solution. (Present the projects to be accepted with the highest IRR to the least IRR (CAPITAL LETTER ONLY WITH NO SPACES PROVIDED (EX: A-B-C-D)
Tesla Company uses a 12% hurdle rate for all capital expenditures. It screens investments using three evaluation techniques: the net present value, the profitability index and the internal rate of return. It has lined up four projects with the following information. Projects in thousands A B C D 400 596 496 544 Initial cash outflow Annual cash inflows Year 1 2 140 130 200 160 190 270 190 250 180 180 180 3 4 130 160 120 If Tesla Company has a capital budget of P1,500,000, what projects should be pursued base on the three criteria? Show necessary computations on your solution. (Present the projects to be accepted with the highest IRR to the least IRR (CAPITAL LETTER ONLY WITH NO SPACES PROVIDED (EX: A-B-C-D)
PRESENT THE PROJECTS TO BE ACCEPTED WITH THE HIGHEST IRR TO THE LEAST IRR
Transcribed Image Text:Tesla Company uses a 12% hurdle rate for all capital expenditures. It screens investments using
three evaluation techniques: the net present value, the profitability index and the internal rate of
return. It has lined up four projects with the following information.
Projects in thousands
A
B C D
400 596 496 544
Initial cash outflow
Annual cash inflows
Year 1
130 200
160
190
2
140
270
190 250
3
180 180
180
4
130 160 120
If Tesla Company has a capital budget of P1,500,000, what projects should be pursued base on
the three criteria? Show necessary computations on your solution. (Present the projects to be
accepted with the highest IRR to the least IRR (CAPITAL LETTER ONLY WITH NO SPACES PROVIDED
(EX: A-B-C-D)
Definition Definition Discount rate of a project wherein its net present value equals zero. Internal rate of return equates the present value of future cash flows with the initial investments. Internal rate of return helps to determine nominal cash flows.
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