Question 1The following information for particular project: using the S.A (Sensitive Analysis) to show isthe project acceptable economically or not?Sales Quantity725 Thousands unitsPrice for Sales Quantity$11Cost for Quantity$9.5Project life span (virtual)7 yearsinvestment costs1330Thousands $Well-Noticed that average cost of capital (i= 9 %).The required:The test of the project net present value under the following situations:A) current situation,B) under the economic changes: Reduced selling price per unit (10%). & (15%) increase in sales& 5% decrease in the cost of the unit produced.

NPV is the one of the technique in capital budgeting concept which help in decision making whether…

Answered: Question 1 The following information…

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:
Internal rate of return and modified internal rate of return For the project shown in the following table,, calculate the internal rate of return (IRR) and modified internal rate of return (MIRR). If the cost of capital is 12.13%, indicate whether the project is acceptable according to IRR and MIRR. The project's IRR is %. (Round to two decimal places.) Data table (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) Initial investment (CF) Year (t) 1 2 3 4 5 Print $70,000 Cash inflows (CFt) $15,000 $25,000 $25,000 $15,000 $10,000 Done X
Problem 2: For the following data, find: (a) The profit expected if the project is finished in 26 days. (b) The maximum profit obtainable and the project duration associated with it, i.e., the optimum duration. Project Duration Minimum Direct Cost (S) 20 41,000 22 40,600 25 39,900 27 39,200 29 38,400 31 37,600 33 36,900 34 36,500 36 36,250 Bid = $48,000 Setup cost $1,000 Indirect cost = $250/day
Information on four investment proposals is given below: Investment required. Present value of cash inflows Net present value Life of the project Answer is complete but not entirely correct. Profitability Index Investment Proposal ABCO A В Required: 1. Compute the profitability index for each investment proposal. (Round your answers to 2 decimal places.) 2. Rank the proposals in terms of preference. с D 3 0.41 0.38 0.50 0.33 Rank Preference A $ (240,000) 337,300 $ 97,300 Second Third First Fourth ✓ ✔ 5 years Investment Proposal $ (73,500) 110,250 $36,750 B $ (105,000) 144,900 $ 39,900 7 years 6 years $ (126,000). 168,000 $ 42,000 6 years
Coffer Company is analyzing two potential investments. Project X Cost of machine Net cash flow: Year 1 Year 2 $ 85,470 Project Y $ 65,000 33,000 33,000 3,000 30,000 Year 3 Year 4 33,000 0 • 30,000 25,000 If the company is using the payback period méthod, and it requires a payback period of three years or less, which project(s) should be selected? Multiple Choice Project Y. Project X. Both X and Y are acceptable projects. Neither X nor Y is an acceptable project.
5.1.3 Calculate the Net Present Value of each project (with amounts rounded off to the nearest Rand). INFORMATION Zeda Enterprises has the option to invest in machinery in projects A and B but finance is only available to invest in one of them. You are given the following projected data: Initial cost Scrap value Depreciation per year Net profit Year 1 Year 2 Year 3 Year 4 Year 5 Net cash flows Year 1 Year 2 Year 3 Year 4 Year 5 Project A R300 000 R40 000 R52 000 R20 000 R30 000 R50 000 R60 000 R10 000 Project B R300 000 0 R60 000 R90 000 R90 000 R90 000 R90 000 R90 000
"Consider the following two mutually-exclusive alternatives: Project Alternatives n Project A1 Cash Flows Project A2 Cash Flows $14,000 -$17,000 +$21,000 1 + $4,000 2+ $4,000 +$12,000 If MARR=15% and assuming indefinite required service and repeatability, use the incremental NPV and IRR analyses in parts (a) and (b) of the problem, respectively, to choose the project in part (c). Please note that project alternatives A1 and A2 have different lives, namely three years for A1 and one year for A2. The alternatives should be compared over the same period, so project A2 will have to be repeated twice." (a) The Net Present Value of the incremental investment is: (b) The Internal Rate of Return of the incremental investment is: (c) We should choose project alternative: + Note: Please enter your answers to two decimal places. If using the interest factor method, apply the value of the factor as presented in the table or spreadsheet (with all four decimal places).
Which of the following comes closest to the net present value (NPV) of a project whose initial investment is $5 and which produces two cash flows: the first at the end of year 2 of $3 and the second at the end of year 4 of $7? The required rate of return is 13%? Select one: a. $1.84 b. $0 c. $1.64 d. $2.05 e. $2.26
The following information is available on two mutually exclusive projects. Project Year 0 Year 1 Year 2 Year 3 Year 4 A -$700 $200 $300 $400 $500 B -$700 $600 $300 $200 $100 If the required rate of return is 10%, which project should be selected using the net present value (NPV) method? Group of answer choices A B
The following information is available on two mutually exclusive projects. All numbers are in ‘000s. Project Year 0 Year 1 Year 2 Year 3 Year 4 A $700 $300 $300 $400 $400 B $700 $600 $300 $200 $100 a: If the minimum acceptable rate of return is 10%, which project should be selected using the Net Present Value (NPV) method? Which project should be selected if the Internal Rate of Return (IRR) method is used? b: At what cross‐over rate would the firm be indifferent between the two projects? What is the NPV for both projects at the crossover rate? c: How much should cash flow in year 3 for project B increase or decrease in order for NPV(B) to be equal to NPV(A)?
An NPV profile plots a project's NPV at various costs of capital, labeled "A" and "B" in the graph. A project's NPV profile is shown as follows. Identify the range of costs (ranges labeled "A" and "B") of capital that a firm would use to accept and reject this project. A-Z NPV (Dollars) 400 dofice 300 200 A 100 B -100 -200 0 2 4 6 8 10 12 14 16 18 20 COT OF CAPITAL (Percent) A WACC IRR The point at which the NPV profile intersects the horizontal axis represents the
Put answer in table format Yokam Company is considering two alternative projects. Project 1 requires an initial investment of $560,000 and has a present value of cash flows of $2,200,000.0. Project 2 requires an initial investment of $5,000,000 and has a present value of cash flows of $7,000,000. 1. Compute the profitability index for each project.2. Based on the profitability index, which project should the company prefer?

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