Unequal lives-ANPV approach Portland Products is considering the purchase of one of three mutually exclusive projects for increasing production efficiency. The firm plans to use a 13.1% cost of capital to evaluate these equal-risk projects. The initial investment and annual cash inflows over the life of each project are shown in the following 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 2345678 u. VUIMMU BIV TRE Project X $78,000 $16,700 25,100 33,000 40,800 PETIT. Project X Project Z Project Y Project Y $52,000 Cash inflows (CF) $27,800 38,200 a. Calculate the NPV for each project over its life. Rank the projects in descending order on the basis of NPV. b. Use the annualized net present value (ANPV) approach to evaluate and rank the projects in descending order on the basis of ANPV c. Compare and contrast your findings in parts (a) and (b). Which project would you recommend that the firm acquire? The net present value for project X is $4133 (Round to the nearest cent.) The net present value for project Y is: $ 2443.34 (Round to the nearest cent.) The net present value for project Z is $3822.84 (Round to the nearest cent.) Rank the projects in descending order on the basis of NPV. Rank the projects below. (Select from the drop-down menus.) First Second: Third: Project Z $66,000 $14,600 14,600 14,600 14,600 14,600 14,600 14,600 14,600 b. Use the annualized net present value (ANPV) approach to evaluate and rank the projects in descending order on the basis of ANPV The ANPV for project X is $ (Round to the nearest cent.)
Unequal lives-ANPV approach Portland Products is considering the purchase of one of three mutually exclusive projects for increasing production efficiency. The firm plans to use a 13.1% cost of capital to evaluate these equal-risk projects. The initial investment and annual cash inflows over the life of each project are shown in the following 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 2345678 u. VUIMMU BIV TRE Project X $78,000 $16,700 25,100 33,000 40,800 PETIT. Project X Project Z Project Y Project Y $52,000 Cash inflows (CF) $27,800 38,200 a. Calculate the NPV for each project over its life. Rank the projects in descending order on the basis of NPV. b. Use the annualized net present value (ANPV) approach to evaluate and rank the projects in descending order on the basis of ANPV c. Compare and contrast your findings in parts (a) and (b). Which project would you recommend that the firm acquire? The net present value for project X is $4133 (Round to the nearest cent.) The net present value for project Y is: $ 2443.34 (Round to the nearest cent.) The net present value for project Z is $3822.84 (Round to the nearest cent.) Rank the projects in descending order on the basis of NPV. Rank the projects below. (Select from the drop-down menus.) First Second: Third: Project Z $66,000 $14,600 14,600 14,600 14,600 14,600 14,600 14,600 14,600 b. Use the annualized net present value (ANPV) approach to evaluate and rank the projects in descending order on the basis of ANPV The ANPV for project X is $ (Round to the nearest cent.)
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
Related questions
Question
Transcribed Image Text:Unequal lives-ANPV approach Portland Products is considering the purchase of one of three mutually exclusive projects for increasing
production efficiency. The firm plans to use a 13.1% cost of capital to evaluate these equal-risk projects. The initial investment and annual cash
inflows over the life of each project are shown in the following 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
2345678
u. VUIMMU BIV TRE
Project X
$78,000
$16,700
25,100
33,000
40,800
PETIT.
Project X
Project Z
Project Y
Project Y
$52,000
Cash inflows (CF)
$27,800
38,200
a. Calculate the NPV for each project over its life. Rank the projects in descending order on the basis of NPV.
b. Use the annualized net present value (ANPV) approach to evaluate and rank the projects in descending order on the basis of ANPV
c. Compare and contrast your findings in parts (a) and (b). Which project would you recommend that the firm acquire?
The net present value for project X is $4133
(Round to the nearest cent.)
The net present value for project Y is: $ 2443.34 (Round to the nearest cent.)
The net present value for project Z is $3822.84 (Round to the nearest cent.)
Rank the projects in descending order on the basis of NPV.
Rank the projects below. (Select from the drop-down menus.)
First
Second:
Third:
Project Z
$66,000
$14,600
14,600
14,600
14,600
14,600
14,600
14,600
14,600
b. Use the annualized net present value (ANPV) approach to evaluate and rank the projects in descending order on the basis of ANPV
The ANPV for project X is $ (Round to the nearest cent.)
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