Foundations Of Finance
Foundations Of Finance
10th Edition
ISBN: 9780134897264
Author: KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher: Pearson,
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Chapter 10, Problem 7SP

(NPV, PI, and IRR calculations) You are considering two independent projects, project A and project B. The initial cash outlay associated with project A is $50,000, and the initial cash outlay associated with project B is $70,000. The required rate of return on both projects is 12 percent. The expected annual free cash inflows from each project are as follows:

Chapter 10, Problem 7SP, (NPV, PI, and IRR calculations) You are considering two independent projects, project A and project

Calculate the NPV, PI, and IRR for each project and indicate if the project should be accepted.

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( NPV and Pl calculations ) You are considering two independent projects in Birmingham and Manchester, respectively. The initial cash outlay associated with the Birmingham project is $550,000, and the initial cash outlay associated with the Manchester project is $750,000. The required rate of return on both projects is 13 percent. The expected annual free cash inflows from each project are as follows: Calculate the NPV and PI for each project and indicate if the project should be accepted. MANCHESTER BIRMINGHAM -$550,000 -$750,000 Initial outlay Inflow year 1 Inflow year 2 170,000 170,000 170,000 120,000 120,000 Inflow year 3 Inflow year 4 Inflow year 5 Inflow year 6 120,000 120,000 120,000 170,000 170,000 120,000 170,000
(Net present value, profitability index, and internal rate of return calculations). You are considering two independent projects, project A and project B. The initial cash outlay associated with project A is $50,000 and the initial cash outlay associated with project B is $70,000. The required rate of return on both projects is 12 percent. The expected annual free cash flows from each project are as follows: YEAR PROJECT A PROJECT B 0 -$50,000 -$70,000 1 12,000 13,000 2 12,000 13,000 3 12,000 13,000 4 12,000 13,000 5 12,000 13,000 6 12,000 13,000 Calculate the NPV, PI, and IRR for each project and indicate if the project should be accepted.
There are two projects under consideration by the Rainbow factory. Each of the projects will require an initial investment of $35,192 and is expected to generate the following cash flows: First Year Second Year Third Year Total Alpha Project $32,000 $22,000 $5,000 $59,000 Beta Project 7,000 23,000 29,047 59,047 A. Calculate the internal rate of return on both projects. Use the IRR spreadsheet function to calculate internal rate of return. Alpha Project % Beta Project % B. Make a recommendation on which one to accept.

Chapter 10 Solutions

Foundations Of Finance

Ch. 10 - (NPV, PI, and IRR calculations) Fijisawa Inc. is...Ch. 10 - (Payback period, NPV, PI, and IRR calculations)...Ch. 10 - (NPV, PI, and IRR calculations) You are...Ch. 10 - (Payback period calculations) You are considering...Ch. 10 - (NPV with varying required rates of return)...Ch. 10 - Prob. 10SPCh. 10 - (NPV with varying required rates of return) Big...Ch. 10 - (NPV with different required rates of return)...Ch. 10 - (IRR with uneven cash flows) The Tiffin Barker...Ch. 10 - (NPV calculation) Calculate the NPV given the...Ch. 10 - (NPV calculation) Calculate the NPV given the...Ch. 10 - (MIRR calculation) Calculate the MIRR given the...Ch. 10 - (PI calculation) Calculate the PI given the...Ch. 10 - (Discounted payback period) Gios Restaurants is...Ch. 10 - (Discounted payback period) You are considering a...Ch. 10 - (Discounted payback period) Assuming an...Ch. 10 - (IRR) Jella Cosmetics is considering a project...Ch. 10 - (IRR) Your investment advisor has offered you an...Ch. 10 - (IRR, payback, and calculating a missing cash...Ch. 10 - (Discounted payback period) Sheinhardt Wig Company...Ch. 10 - (IRR of uneven cash-flow stream) Microwave Oven...Ch. 10 - (MIRR) Dunder Mifflin Paper Company is considering...Ch. 10 - (MIRR calculation) Arties Wrestling Stuff is...Ch. 10 - (Capital rationing) The Cowboy Hat Company of...Ch. 10 - Prob. 29SPCh. 10 - (Size-disparity problem) The D. Dorner Farms...Ch. 10 - (Replacement chains) Destination Hotels currently...Ch. 10 - Prob. 32SPCh. 10 - Prob. 33SPCh. 10 - Why is the capital-budgeting process so important?Ch. 10 - Prob. 2MCCh. 10 - What is the payback period on each project? If...Ch. 10 - What are the criticisms of the payback period?Ch. 10 - Prob. 5MCCh. 10 - Prob. 6MCCh. 10 - Prob. 7MCCh. 10 - Prob. 8MCCh. 10 - Prob. 9MCCh. 10 - Determine the IRR for each project. Should either...Ch. 10 - How does a change in the required rate of return...Ch. 10 - Caledonia is considering two investments with...
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