Three machine alternatives are being evaluated by a company. The annual cash flows for each of these three alternatives are given in the table below (all in dollars). Based on the NPW criterion, rank these three alternatives from most attractive to least attractive assuming a MARR of 7% compounded annually. n Alternative 1 Alternative 2 Alternative 3 0 -1,400 -2,000 -1,000 1 300 300 400 2 500 600 400 3 500 800 400 4 700 1,000 400 Alternative 1– Alternative 3 – Alternative 2 Alternative 2 – Alternative 3 – Alternative 1 Alternative 3 – Alternative 2 – Alternative 1 O Alternative 3 - Alternative 1- Alternative 2 O O O O

Three machine alternatives are being evaluated by a company. The annual cash flows for each of these three alternatives are given in the table below (all in dollars). Based on the NPW criterion, rank these three alternatives from most attractive to least attractive assuming a MARR of 7% compounded annually. n Alternative 1 Alternative 2 Alternative 3 0 -1,400 -2,000 -1,000 1 300 300 400 2 500 600 400 3 500 800 400 4 700 1,000 400 Alternative 1– Alternative 3 – Alternative 2 Alternative 2 – Alternative 3 – Alternative 1 Alternative 3 – Alternative 2 – Alternative 1 O Alternative 3 - Alternative 1- Alternative 2 O O O O

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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Consider the following cash flow profile and assume MARR is 10%/year. EOY NCF 0 -$100 1 $15 2 $15 3 $15 4 $15 5 $15 6 $15 Part a Determine the ERR for this project: % Carry all interim calculations to 5 decimal places and then round your final answer to 1 decimal place. The tolerance is ±0.2.
Duo Corporation is evaluating a project with the following cash flows: Year 0 Cash Flow -$ 16,600 1 7,700 2 8,900 3 4 5 8,500 7,300 -4,700 The company uses an interest rate of 11 percent on all of its projects. Calculate the MIRR of the project using all three methods. Note: Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16. Discounting approach Reinvestment approach % % Combination approach %
A company is considering three alternative investment projects with different net cash flows. The present value of net cash flows is calculated using Excel and the results follow. Potential Projects Present value of net cash flows (excluding initial investment) Initial investment Project A $ 11,226 (10,000) Project B $ 10,568 (10,000) a. Compute the net present value of each project. b. If the company accepts all positive net present value projects, which of these will it accept? c. If the company can choose only one project, which will it choose on the basis of net present value? Complete this question by entering your answers in the tabs below. Required A Required B Required C Compute the net present value of each project. Potential Projects Project A Project B Project C Present value of net cash flows Initial investment Net present value $ $ $
Consider the following cash flow profile and assume MARR is 10%/year. EOY NCF Part a Determine the ERR for this project. 0 1 2 3 4 5 6 % -$50 $32 $32 $32 $32 $32 $32 Carry all interim calculations to 5 decimal places and then round your final answer to 1 decimal place. The tolerance is ±0.2.
A small company wants to invest in Project A or B. The cash flows for both are shown below. Determine the payback period for each project assuming a MARR of 5% and suggest which project should be selected based on discounted payback period analysis.
Consider the following cash flow profile and assume MARR is 10%/year. EOY NCF Part a Part b Part c Determine the IRR for this project. 0 1 2 3 4 5 6 % $-140 $60 $60 $30 $-10 $50 $60 Carry all interim calculations to 5 decimal places and then round your final answer to 1 decimal place. The tolerance is ±0.2.
Salsa Company is considering an investment in technology to improve its operations. The investment costs $241,000 and will yield the following net cash flows. Management requires a 10% return on investments. (PV of $1, FV of $1, PVA of $1, and FVA of $1) Note: Use appropriate factor(s) from the tables provided. Year Net cash Flow 1 $ 48, 200 2 53,900 3 76, 400 4 95,500 5 126,500 Required: Determine the payback period for this investment. Determine the break - even time for this investment. Determine the net present value for this investment. Should management invest in this project based on net present value?
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Nikul
Consider the following projects, X and Y where the firm can only choose one. Project X costs $1500 and has cash flows of $678, $652, $347, $111, $54, $16 in each of the next 6 years. Project Y also costs $1500, and generates cash flows of $738, $693, $405 for the next 3 years, respectively. WACC=11%.A) Draw the timelines for both projects: X and Y.
s

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