You and a coworker are analyzing two proposed capital investments with the following cash flows:Year Project A Project B0-$15,000-$38,000110,0009,50024,5009,50034,5009,50041,50026,600The cost of capital for both projects is 10 percent.Calculate the profitability index (PI) for each project. (Do not round discount factors. Round intermediate calculations toe.g. 15.25 and final answer to 4 decimal places, e.g. 1.2527.)Pl for Proiect A

The Profitability Index (PI) is calculated using the formula:PI=InitialInvestmentPV of Future Cash…

Answered: You and a coworker are analyzing two…

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter12: Capital Budgeting: Decision Criteria

Section: Chapter Questions

Problem 13P

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Project S has a cost of $10,000 and is expected to produce benefits (cash flows) of $3,000 per year for 5 years. Project L costs $25,000 and is expected to produce cash flows of $7,400 per year for 5 years. Calculate the two projects’ NPVs, IRRs, MIRRs, and PIs, assuming a cost of capital of 12%. Which project would be selected, assuming they are mutually exclusive, using each ranking method? Which should actually be selected?
You and a coworker are analyzing two proposed capital investments with the following cash flows: Year Project A Project B 0 -$22,000 -$38,000 1 17,000 9,500 2 5.400 9,500 3 5,400 9,500 4 2,000 26,600 The cost of capital for both projects is 10 percent. Calculate the profitability index (PI) for each project. (Do not round discount factors. Round intermediate calculations to 2 decimal pla e.g. 15.25 and final answer to 4 decimal places, e.g. 1.2527.)
The following are the cash flows of two projects: Year Project A 0 $ (240) Project B. $ (240) 1 120 140 2 120 140 3 4 120 120 140 If the opportunity cost of capital is 12%, what is the profitability index for each project? Note: Do not round intermediate calculations. Round your answers to 4 decimal places. Project A B Profitability Index +
The following are the cash flows of two projects: Project B Year Project A $ (300) 0 $ (300) 1 180 200 2 180 200 3 180 200 4 180 If the opportunity cost of capital is 12%, what is the profitability index for each project? Note: Do not round intermediate calculations. Round your answers to 4 decimal places. Project A B Profitability Index
The following are the cash flows of two projects: Year Project A Project B 0 $ (200) $ (200) 1 80 100 2 80 100 3 80 100 4 80 If the opportunity cost of capital is 11%, what is the profitability index for each project Note: Do not round intermediate calculations. Round your answers to 4 decimal places.
Consider the following cash flows for two mutually exclusive capital investment projects. The required rate of return is 16%. Use this information for the next 3 questions. Year Project A Cash Flow Project B Cash Flow ($50,000) ($20,000) 1 15,000 6,000 15,000 6,000 15,000 6,000 4 13,500 5,400 13,500 5,400 6,750 5,400 What is the profitability index of project B? 1.03 1.06 .94 1.01 1.09
I need help finding the Profitability index for each project (D) using Excel
Refer to two projects with the following cash flows: Project A -$150 65 65 65 65 Year e Project B -$150 75 75 75 If the opportunity cost of capital is 8%, what is the profitability index for each project? (Round your answers to 4 decimal places.) Project A Project B Does the profitability index rank the projects A and B correctly? (Click to select)
The cash flows associated with an investment project are as follows: Project Y (200 000) Year 1 100 000 2 100 000 3 120 000 4 110 000 The discount rate is 8 percent. What's the discount payback period of the projects? (compile a spreadsheet) Calculate NPV, PI of a projects Calculate IRR of a projects Should the firm accept the project? a) b) c) d)
A firm evaluates all of its projects by applying the NPV decision rule. A project under consideration has the following cash flows: Year Cash Flow $28,900 12,900 15,900 11,900 2. What is the NPV for the project if the required return is 11 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) NPV
The Michner Corporation is trying to choose between the following two mutually exclusive design projects: Year Cash Flow (I) Cash Flow (II) 0 -$ 82,000 -$ 21,700 1 37,600 11,200 2 11,200 11,200 37,600 37,600 a-1. If the required return is 10 percent, what is the profitability index for each project? Note: Do not round intermediate calculations and round your answers to 3 decimal places, e.g., 32.161. a-2. If the required return is 10 percent and the company applies the profitability index decision rule, which project should the firm accept? b-1. If the required return is 10 percent, what is the NPV for each project? Note: Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. b-2. If the company applies the NPV decision rule, which project should it take? a-1. Project I Project II a-2. Project acceptance b-1. Project I Project II b-2. Project acceptance
Case 1: Assume you are evaluating two mutually exclusive projects,the cash flows of which appear below, and that your company uses a cost of capital of 8 percent to evaluate projects such as these. Time Project A Cash Flow Project B Cash Flow 0 -$650 -$700 1 100 300 2 250 -200 3 250 550 4 200 200 5 100 80 a. Calculate the payback of Project A. b. Calculate the discounted payback of Project A. c. Calculate the IRR of Project A. d. Using the NPV method and assuming a cost of capital of 8 percent, which of these projects should be accepted?

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