Two mutually exclusive projects are under consideration. Project A ||$5,000 $2,750 $2,750 $2,750 $2,750 $2,750 Project B |-$9,000 $1,000 $3,000 $5,000 $7,000 $9,000 Year 1 2 4 a) Which project should be selected if the simple payback method is used to make the determination? b) Which project should be selected if NPV were used at 10% interest? c) Which project should be selected if incremental ROR were used at 20% interest? d) Explain any difference in choices.

Two mutually exclusive projects are under consideration. Project A ||$5,000 $2,750 $2,750 $2,750 $2,750 $2,750 Project B |-$9,000 $1,000 $3,000 $5,000 $7,000 $9,000 Year 1 2 4 a) Which project should be selected if the simple payback method is used to make the determination? b) Which project should be selected if NPV were used at 10% interest? c) Which project should be selected if incremental ROR were used at 20% interest? d) Explain any difference in choices.

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

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Assignment Exercise A1) Salalah company management is considering two competing investment Projects A and B. Project A 1000 Project B 1000 Year Initial Investment 1 275 300 275 300 275 300 4 275 300 300 5 275 DISCOUNT RATE 3.15% Q1) Use the information below and help the management in choosing the most desirable Project using all the following technique: استخدم المعلومات الواردة أدناه وساعد الإدارة في اختيار المشروع الأكثر رواجا باستخدام جميع الأساليب التالية 1) Payback Period Technique. 2) Discounted Payback Period Technique. 3) Net Present Value Technique 4) Profitability Index Technique. Q2) Based on your solution or answer to question 1, comment as to which proposal is better and why? بناءً على حلك أو إجابتك على السؤال 1 ، قم بالتعليق على أي اقتراح أفضل ولماذا؟
You are evaluating two mutually exclusive projects. Period Project X Project Y 0 - $5,000 - $4,000 1 $ 3,250 $3,250 2 $3,250 $2,000 IRR 19.43 % 22.17% If your firm has a cost of capital of 10%, which project should you select? Group of answer choices Project X Project Y Insufficient information to provide an answer
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Assignment 1 Alpha Ltd has the following projects to undertake. Present value Future value Remove the bridge 84761.90 89000 Repair the bridge 121330.10 168600 Modify the bridge 650669.79 96100 Replace the bridge 1294295.49 1435000 What are the pros and cons of each option ?
Information for two alternative projects involving machinery investments follows: Project 1 Initial investment Salvage value Annual income $ (128,000) Ө Project 2 $ (98,000) 18,000 14,080 11,600 a. Compute accounting rate of return for each project. b. Based on accounting rate of return, which project is preferred? Complete this question by entering your answers in the tabs below. Required A Required B Compute accounting rate of return for each project. Project 1 Project 2 Numerator: Accounting Rate of Return Denominator: Required A Required B Based on accounting rate of return, which project is preferred? Based on accounting rate of return, is preferred. = Accounting rate of return
The cash flows for two mutually exclusive projects are given as follows: Co C1 C2 C3 Project +7,800 +7,800 +7,800 -20,000 +25,000 Y -20,000 a. Which project would you choose using the NPV method if the discount rate is 5%? b. Which project would you choose using the IRR method?
The following table contains information about four potential investment projects that Castle Corporation is considering. Payback Period Required Investment $ 900,000 $ 1,150,000 $ 1,400,000 $ 1,900,000 Project B с D Project Life 5 Required 1 ARR 39.00% 21.00% 22.50% 22.20% Complete this question by entering your answers in the tabs below. 1st preferred 2nd preferred 3rd preferred 4th preferred 3.6 4.8 4.5 2.5 Required: 1. Rank the four projects in order of preference under each method indicated by the headers: 2. Which method is the best for evaluating the investments? Profitability Index 2.19 1.98 1.61 1.56
You have 3 projects with the following cash flows: Year 1 Project 1 Project 2 Project 3 - $150 $18 $42 $61 $79 - 6,494 - 245 - 826 7,005 21 40 61 80 For which of these projects is the IRR rule reliable? Put another way, for which of these projects would you feel comfortable that the IRR decision rule would agree with the NPV decision rule? (Choose the most appropriate answer) O A. Project 1 O B. Project 1 & Project 3 OC. There is not enough information available to answer this question. O D. Project 3 O E. The IRR rule should agree with the NPV rule for all of the above projects. O F. Project 2
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Boca Incorporated and Davie Corporation are two mutually exclusive projects: A WACC O 20.62% O $5500 O 8.16% O 21.88% time 0 1 2 3 4 O 11% 8.25% (8500.00) 3600.00 2400.00 2850.00 5200.00 You are asked to provide an NPV profile for these two projects. At which rate will the NPVs for the two projects be equal? B (9500.00) 3900.00 2900.00 2900.00 5550.00
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