You have been asked by MPAC Ltd to analyse two projects, X and Y. Each project costs£1,000,000, and the company's cost of capital is 10 percent per annum. The expected net cashflows are as follows:Project X£600,000£500,000£300,000£100,000Project Y£200,000£300,000£400,000£675,000Year134Required:Calculate the following for each project:i)ii)iii)a)net present valuemodified internal rate of returndiscounted payback periodb)Which project(s) should be accepted if they are independent? Explain why.c)How might a change in the cost of capital produce a conflict between the net presentvalue and internal rate of return rankings of these two projects? Would this conflict existif the cost of capital were changed? Why does the conflict exist? Discuss critically.

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You have been asked by MPAC Ltd to analyse two projects, X and Y. Each project costs £1,000,000, and the company's cost of capital is 10 percent per annum. The expected net cash flows are as follows: Year 1 2 3 4 Project X £600,000 £500,000 £300,000 £100,000 Project Y £200,000 £300,000 £400,000 £675,000 Required: a) Calculate the following for each project: i) ii) net present value modified internal rate of return ii) discounted payback period

You have been asked by MPAC Ltd to analyse two projects, X and Y. Each project costs £1,000,000, and the company's cost of capital is 10 percent per annum. The expected net cash flows are as follows: Year 1 2 3 4 Project X £600,000 £500,000 £300,000 £100,000 Project Y £200,000 £300,000 £400,000 £675,000 Required: a) Calculate the following for each project: i) ii) net present value modified internal rate of return ii) discounted payback period

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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Suppose a company has the following three projects and limits its capital budget to $50000. Projects Present Value of Cash Inflows Initial Investment A $40000 $25000 В 37500 25000 70000 50000 1. Calculate the projects' net present values (NPVS). 2. Calculate the projects' profitability indexes (PIs). 3. Which project(s) should the company choose? Why?
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