UTCM's Knowledge and Communication Services Centre (KCSC) is considering two proposals to overhaul its network system and infrastructure. They have received two proposals as shown in Figures la and 1b. Analyze which proposal has the best return on investment for 6 years 50,000 50,000 50,000 40,000 100,000 70,000 12% per year compounded yearly 30,000 30,000 20,000 Figure la: Proposal 1 Cash Flow Diagram 7% per year compounded semi-annually 50,000 50,000 50,000 50,000 50,000 years Figure 1b: Proposal 2 Cash Flow Diagram years

UTCM's Knowledge and Communication Services Centre (KCSC) is considering two proposals to overhaul its network system and infrastructure. They have received two proposals as shown in Figures la and 1b. Analyze which proposal has the best return on investment for 6 years 50,000 50,000 50,000 40,000 100,000 70,000 12% per year compounded yearly 30,000 30,000 20,000 Figure la: Proposal 1 Cash Flow Diagram 7% per year compounded semi-annually 50,000 50,000 50,000 50,000 50,000 years Figure 1b: Proposal 2 Cash Flow Diagram years

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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Cash payback period, net present value method, and analysis Elite Apparel Inc. is considering two investment projects. The estimated net cash flows from each project are as follows: Each project requires an investment of $900,000. A rate of 15% has been selected for the net present value analysis. Instructions 1. Compute the following for each product: a. Cash payback period. b. The net present value. Use the present value of $1 table appearing in this chapter (Exhibit 2). 2. Prepare a brief report advising management on the relative merits of each project.
Accounting Draw the cash flow diagram for the given project below and then calculate the project net profit. The following table shows the activities description, dependency, duration, and cost elements. Assume the followings: Project overhead 8%. Tax 3%. Bond 1.25%. Profit 6%. Interest rate 9% per year. Down payment 10% with a guarantee letter, which costs 0.25% per month paid to the bank at the project start date. A performance guarantee letter of 10% will be submitted from contractor at the project begin. Invoices are submitted every month and will be paid a month later. Retention 10% and will be paid at the last invoice. Subcontractors: retention 10% will be paid at the last invoice, down payment 20%. Labor: labor expenses to be paid bi-weekly. Equipment: equipment expenses
1. Google, Inc., uses a maximum payback period of 6 years and currently must choose between two mutually exclusively projects. Project Alpha requires an initial outlay of BD 24000; project Beta requires an initial outlay of BD44000. Using the expected cash inflows given for each project in the following table. Expected cash flow Year Project Alpha Project Beta 1 BD6000 BD19000 2 BD9000 BD6000 3 BD4000 BD4000 4 BD6000 BD13000 5 BD3500 BD5000 6 BD2000 BD4000 Required: 1. Determine the payback period of each project 2. Because they are mutually exclusive, Google must choose one. Which should the company invest in? 3. Explain why one of the projects is the better choice than the other
Connor Corporation is considering two projects (see below). For your analysis, ass rate of return of 10%. Based on your analysis, which is the best choice? Initial Investment Cash Flow Year 1 PV NPV Profitability Index IRR Project A -465,000 510,000 463,636.364 ($1,363.64) $1.00 ANSWER 10% Project B -700,000 You can change the i 850,000 772,727.273
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You are considering the investment of $111,000 (today) in a lemonade stand. Also, you expect the stand to generate the following future cash flows: • At the end of year 1: $0 • At the end of year 2: $0 • At the end of year 3: $0 • At the end of year 4: $178,000 What is the IRR (Internal Rate of Return) of this project? (Answer to the nearest 0.01%)
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Use the Modified IRR (MIRR) method to determine the rate of return of a project that has the following cash flow diagram. The investment rate is 15% and the borrowing rate is 12%. g = 20% $3 $3 $3 $3 years 11 3. 4 6. 7 8 9 10 $2 S2 $2 $2
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