You are asked to evaluate the following two projects for the Norton Corporation. Using the net present value method combined with the profitability index approach described in footnote 2 of this chapter, which project would you select? Use a discount rate of 14 percent. Project X (videotapes of the weather report) ($20,000 investment) Year Cash Flow $10.000 8.000 3 9,000 8,000 Project X (videotapes of the weather report) ($40,000 investment) Year Cash Flow 1. $20.000 2 13.000 14.000 16.000

You are asked to evaluate the following two projects for the Norton Corporation. Using the net present value method combined with the profitability index approach described in footnote 2 of this chapter, which project would you select? Use a discount rate of 14 percent. Project X (videotapes of the weather report) ($20,000 investment) Year Cash Flow $10.000 8.000 3 9,000 8,000 Project X (videotapes of the weather report) ($40,000 investment) Year Cash Flow 1. $20.000 2 13.000 14.000 16.000

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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If a $300,000 investment has a project profitability index of 0.25, what is the netpresent value of the project?a. $75,000b. $225,000c. $25,000d. $275,000
K Mc Graw Hill You are asked to evaluate the following two projects for the Norton corporation. Use a discount rate of 13 percent. Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods. Project X (Videotapes of the Weather Report) ($18,000 Investment) Year Cash Flow 1 $ 9,000 2 7,000 8,000 7,600 3 4 Profitability index Project Y (Slow-Motion Replays of Commercials) ($38,000 Investment) Cash Flow $ 19,000 12,000 13,000 15,000 a. Calculate the profitability index for project X. Note: Do not round intermediate calculations and round your answer to 2 decimal places. Year 1 2 3 4 Profitability index b. Calculate the profitability index for project Y. Note: Do not round intermediate calculations and round your answer to 2 decimal places. c. Which project would you select based on the profitability index? O Project X Project Y Project Y
i
Suppose the following two independent investment opportunities are available to a company. The appropriate discount rate is 8 percent. Year O 1 2 3 Project Alpha -$4,500 b. 2,300 2,200 1,450 a. Compute the profitability index for each of the two projects. (Do not round intermediate calculations and round your answers to 3 decimal places, e.g., 32.161.) Project Alpha Project Beta Project Beta -$ 6,100 1,350 4,500 4,000 Profitability Index Which project(s), if either, should the company accept based on the profitability index rule? Project Alpha O Project Beta Neither project O Both projects
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The Michner Corporation is trying to choose between the following two mutually exclusive design projects: Please help me solve this problem using Excel.
The following information will be used to answer questions 8, 9, and 10. Your company can invest in 1 of the following projects: Cash Flows Year Project A Project B 0 -70.000 -65.000 1 30.000 8.000 2 10.000 8.000 3 10.000 8,000 4 18.000 9.000 O 5.000 30.000 6 4.000 40.000 The interest rate is 8%. 8a. What is the payback period for each project? 8b. If you base your decision on which project has the shortest payback, which will you choose?
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d) ALMOND Company is considering two important proposals with the following cash flows. Project A Project B Period (Year) Cost (Initial Net cash flow Cost (Initial Outlay) Net cash flow Outlay) 0 $45,000 $60,000 1 $25,000 $24,000 2 $20,000 $25,000 3 $15,000 $30,000 For each project, compute its net present value using a discount rate of 15%. Which project should be accepted if the projects are mutually exclusive?
Information on four investment proposals is given below. Investment required Present value of cash inflows Net present value Life of the project Required: 1 Compute the profitability index for each investment proposal. Note: Round your answers to 2 decimal places. 2. Rank the proposals in terms of preference Investment Profitability Proposal Index A B C D S (150,000) 211,800 $61,500 Rank Preference 5 years Investment Proposal $(80,000) 110,400 $ 30,400 7 years $ (160,000) 241,600 $ 81,600 6 years D $ (910,000) 1.214,500 $ 304,500 6 years
Consider the following two investment alternatives. Determine the range of investment costs for Alternative B (i.e., min. value < X < max. value) that will convince an investor to select Alternative B. MARR = 10% per year, and other relevant data are shown in the following table. State clearly any assumptions that are necessary to support your answer.
A company is considering two projects. The discount rate is 10 percent, and the projects' cash flows would be: Years 1 3 Project A -$700 $500 $300 $100 Project B -$700 $100 $300 | $600 a. Calculate the projects' NPVS and IRRS. b. If the two projects are independent, which project(s) should be chosen? c. If the two projects are mutually exclusive, which project should be chosen?

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