Oxford Company has limited funds available for investment and must ration the funds among four competing projects. Selectedinformation on the four projects follows:Life ofthePresent ProjectNetInternalInvestmentRateValue$576,770$755,000 ș308,594$720,000 $442,949$920,000 $145,122ProjectRequired(years) of Return9A$870,00025%в141789248D168The net present values above have been computed using a 10% discount rate. The company wants your assistance in determiningwhich project to accept first, second, and so forth.Required:1. Compute the project profitability index for each project.2. In order of preference, rank the four projects in terms of net present value, project profitability index and internal rate of return.Complete this question by entering your answers in the tabs below.Required 1Required 2Compute the project profitability index for each project. (Round your answers to 2 decimal places.)ProjectProfitabilityProjectIndexAВD

Profitability index tells us how much benefit added on each amount of initial investment. it taken…

xford Company has limited funds available for investment and must ration the funds among four competing projects. Selected formation on the four projects follows: Life of Net the Internal Investment Present Project Rate (years) of Return 258 roject Required Value $870,000 $576,770 $755,000 $308,594 $720,000 $442,949 $920,000 $145,122 A 14 178 9 248 D 168 he net present values above have been computed using a 10% discount rate. The company wants your assistance in determining hich project to accept first, second, and so forth. equired: Compute the project profitability index for each project. In order of preference, rank the four projects in terms of net present value, project profitability index and internal rate of return.

xford Company has limited funds available for investment and must ration the funds among four competing projects. Selected formation on the four projects follows: Life of Net the Internal Investment Present Project Rate (years) of Return 258 roject Required Value $870,000 $576,770 $755,000 $308,594 $720,000 $442,949 $920,000 $145,122 A 14 178 9 248 D 168 he net present values above have been computed using a 10% discount rate. The company wants your assistance in determining hich project to accept first, second, and so forth. equired: Compute the project profitability index for each project. In order of preference, rank the four projects in terms of net present value, project profitability index and internal rate of return.

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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Juniper Corporation is considering two alternative investment proposals with the following data: Proposal X Proposal Y Investment $810,000 $466,000 Useful life 8 years 8 years Estimated annual net cash inflows for 8 years $130,000 $70,000 Residual value $58,000 $− Depreciation method Straight−line Straight−line Required rate of return 13% 10% What is the accounting rate of return for Proposal X? (Round any intermediary calculations to the nearest dollar, and round your final answer to the nearest hundredth of a percent, X.XX%.)
Pitt Company is considering two alternative Investments. The company requires a 12% return from its Investments. Neither option has a salvage value. Project X Project Y $243,046 $175,883 Initial Investment Net cash flows anticipated: Year 1 Year 2 Year 3 Year 4 Year 5 82,000 60,000 91,000 82,000 75,000 A. Compute the IRR for both projects using the IRR spreadsheet function. Project X Project Y B. Which project should be recommended. Project X ✓ % % 35,000 54,000 73,000 69,000 26,000
ZumBahlen Inc. is considering the following mutually exclusive projects: Year 0 1 2 3 4 Project A Cash Flow -$5,000 O a. 16.15% O b. 20.15% O c. 18.15% O d. 22.15% 200 800 Project B Cash Flow -$5,000 3,000 3,000 3,000 5,000 At what cost of capital will the net present value of the two projects be the same? (That is, what is the "crossover" rate?) 800 200
Oxford Company has limited funds available for investment and must ration the funds among four competing projects. Selected information on the four projects follows: Project A B C D Investment Required $ 150,000 $ 129,000 $ 103,000 $ 160,000 Present value of Cash Inflows $ 274,323 $ 247,000 $ 205,035 $ 283, 136 Required 1 Required 2 Project Life of The net present values should be computed using a 10% discount rate. The company wants your assistance in determining which project to accept first, second, and so forth. A B C D the Internal Rate of Return 15% 20% 19% 18% Required: 1. Compute the profitability index for each project. 2. In order of preference, rank the four projects in terms of net present value, profitability index, and internal rate of return. Project (years) 7 12 Complete this question by entering your answers in the tabs below. Profitability Index 7 3 Compute the profitability index for each project. (Round your answers to 2 decimal places.)
The profitability analysis of three projects is provided below: Project A Project B Project C NPV $10,000 $5,000 - $1,000 IRR 10% 15% 15% WACC 8% 12% 16% If these projects were independent, which project(s) would be accepted? Why? If these projects were mutually exclusive, which project(s) would be accepted? Why?
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.
Oxford Company has limited funds available for investment and must ration the funds among four competing projects. Selected information on the four projects follows: Present Value of Investment Project Required Cash Inflows A $ 180,000 $ 269,323 B $ 130,000 $ 242,000 C $ 100,000 $ 200,035 D $ 160,000 $ 278,136 Life of the Project (years) 7 12 7 3 Internal Rate of Return 15% 20% 19% 18% The net present values should be computed using a 10% discount rate. The company wants your assistance in determining which project to accept first, second, and so forth. Required: 1. Compute the profitability index for each project. A 2. In order of preference, rank the four projects in terms of net present value, profitability index, and internal rate of return.
Tiberius Manufacturing is considering two alternative investment proposals with the following data: Proposal X Investment $10,800,000 Useful life. Estimated annual net cash inflows for 5 years 5 years $2,160,000 Residual value $60,000 Depreciation method Straight-line Required rate of return 14% Calculate the accounting rate of return for Proposal Y. (Round any intermediate calculations and your final answer to two decimal places.) OA. 13.90% OB. 11.56% OC. 17.83% OD. 7.58% Proposal Y $440,000 5 years $99,000 $35,000 Straight-line 13%
Pitt Company is considering two alternative investments. The company requires a 12% return from its investments. Neither option has a salvage value. Project X Project Y Initial investment $244,049 $180,396 Net cash flows anticipated: Year 1 83,000 35,000 Year 2 59,000 56,000 Year 3 91,000 71,000 Year 4 82,000 68,000 Year 5 77,000 27,000 A. Compute the IRR for both projects using the IRR spreadsheet function. Project X fill in the blank 1% Project Y fill in the blank 2% B. Which project should be recommended.
Management of TSC, Inc. is evaluating a new $79,000 investment with the following estimated cash flows: Year Cash Flow 1 $ 13,000 2 29,000 3 47,000 4 61,000 The firm’s cost of capital is 14 percent and the project will require that the firm spend $25,000 to terminate the project. Use Appendix B to answer the question. Use a minus sign to enter a negative value, if any. Round your answer to the nearest dollar. The NPV of the investment is $ . Should the firm make the investment? The firm make the investment.
The management of Bhytyu Limited are considering several mutually exclusive projects with characteristics as shown in the following table. Project A B C D E Initial Cost ($ millions) 87 121 91 95 118 Accounting rate of return 13% 13% 15% 22% 11% Net Present Value ($ millions) 0 11 -1 7 10 Payback Period (Years) 3 5 7 3 5 Internal Rate of Return 9.5% 13.2% 8.0% 11.7% 12.5% Management’s stated goal is to maximise the wealth of the firm’s owners, and to be accepted any investment project must have a minimum investment yield of 10%. Required: Which of the above projects, if any, should be selected by management? Explain the rationale for your choice.
s

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