Ch 11: Assignment - The Basics of Capital Budgeting Part IIPTODIEM Vwalk-TirougnA company has a 12% WACC and is considering two mutually exclusive investments (that cannot be repeated) with the following cash flows:1346.7Project A-$300-$387-$193-$100$600$600$850-$180Project B-$405$131$131$131$131$131$131$0a. What is each project's NPV? Negative values, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round youranswers to the nearest cent.Project A: $Project B: $b. What is each project's IRR? Do not round intermediate calculations. Round your answers to two decimal places.Project A:%Project B:c. What is each project's MIRR? (Hint: Consider Period 7 as the end of Project B's life.) Do not round intermediate calculations. Round your answersto two decimal places.Project A:%Project B:%d. From your answers to parts a-c, which project would be selected?-Select- d. From your answers to parts a-c, which project would be selected?-Select-If the WACC was 18%, which project would be selected?-Select-e. Construct NPV profiles for Projects A and B. If an amount is zero, enter 0. Negative values, if any, should be indicated by a minus sign. Do notround intermediate calculations. Round your answers to the nearest cent.Discount RateNPV Project ANPV Project B0%510121518.123.01f. Calculate the crossover rate where the two projects' NPVS are equal. Do not round intermediate calculations. Round your answer to two decimalplaces.%g. What is each project's MIRR at a WACC of 18%? Do not round intermediate calculations. Round your answers to two decimal places.Project A:Project B:%

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a. What is each project's NPV? Negative values, if any, should be indicated by a minus sign. Do not round intermediate calculat answers to the nearest cent. Project A: $ Project B: $ b. What is each project's IRR? Do not round intermediate calculations. Round your answers to two decimal places. Project A: % Project B:

a. What is each project's NPV? Negative values, if any, should be indicated by a minus sign. Do not round intermediate calculat answers to the nearest cent. Project A: $ Project B: $ b. What is each project's IRR? Do not round intermediate calculations. Round your answers to two decimal places. Project A: % Project B:

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

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Chapter 22 EOC problems 10-18 Problem 22-11 Investments Quick and Slow cost $1,000 each, are mutually exclusive, and have the following cash flows. The firm's cost of capital is 12 percent. Cash Inflows Q S Year 1 2 $1,200 $357 357 357 357 Q Search this co i 3 4 a. According to the net present value method of capital budgeting, which investment(s) should the firm make? Use Appendix B and Appendix D to answer the question. Use a minus sign to enter negative values, if any. Round your answers to the nearest cent. NPV (Investment Quick): $ NPV (Investment Slow): $ 71.60 84.69 The firm should make investment(s) slow b. According to the internal rate of return method of capital budgeting, which investment(s) should the firm make? Use Appendix D to answer the question. Round your answers to the nearest whole number. IRR (Investment Quick): 20 % IRR (Investment Slow): 16 % The firm should make investment(s) Quick c. If Q is chosen, the $1,200 can be reinvested and earn 14 percent. Does this…
11:52 Investment Appraisal (Year 2 Column 2... 35% 4. An investment has the following cash flows. What is the ARR? Year 0 -90,000 Year 1 45,000 10,000 Year 2 Year 3 30,000 30,000 Year 4 6% 7% 9% 5. Which of the following investments would you choose based on payback? Project 3 years 6 months 5 years 10 months A В ... Activity Chat Teams Assignments More
Question 18 Project A has the following estimated cash flows and present values:Year Cash flow $ Discount factor@ 12% Present value $0 Cost (95 000) 1.0 (95 000) 1–5 Contributionper annum 50 000 3.605 180 250 1–5 Fixed costsper annum (25 000) 3.605 (90 125) 5 Residual value 20 000 0.567 11 340 Required:Calculate the sensitivity of the investment decision to a change in the annual contribution.
Video Excel Online Structured Activity: Capital budgeting criteria A company has a 13% WACC and is considering two mutually exclusive investments (that cannot be repeated) with the following cash flows: 0 1 2 3 4 5 6 7 + Project A -$300 -$387 Project B -$405 $133 -$193 -$100 $133 $133 $600 $133 $600 $133 $850 -$180 $133 $0 The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below. X Open spreadsheet a. What is each project's NPV? Round your answer to the nearest cent. Do not round your intermediate calculations. Project A: $ 162.48 Project B: $ b. What is each project's IRR? Round your answer to two decimal places. Project A: 18.10 % Project B: %
Ch 11- Assignment - The Basics of Capital Budgeting 3. Understanding the IRR and NPV The net present value (NPV) and internal rate of return (IRR) methods of investment analysis are interrelated and are sometimes used together to make capital budgeting decisions. Consider the case of Cold Goose Metal Works Inc.: Last Tuesday, Cold Goose Metal Works Inc. lost a portion of its planning and financial data when both its main and its backup servers crashed. The company's CFO remembers that the internal rate of return (IRR) of Project Omicron is 13.2%, but he can't recall how much Cold Goose originally invested in the project nor the project's net present value (NPV). However, he found a note that detailed the annual net cash flows expected to be generated by Project Omicron. They are: Year Cash Flow Year 1 Year 2 Year 3 Year 4 $1,800,000 $3,375,000 $3,375,000 $3,375,000 The CFO has asked you to compute Project Omicron's initial investment using the information currently available to you. He…
Problem 6-19 Capital Budgeting with Inflation Consider the following cash flows on two mutually exclusive projects: Year Project A -$ Project B -$ 0 54,000 69,000 1 34,000 33,000 2 29,000 42,000 3 24,000 45,000 The cash flows of Project A are expressed in real terms, whereas those of Project B are expressed in nominal terms. The appropriate nominal discount rate is 10 percent and the inflation rate is 4 percent. Calculate the NPV for each project. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) Project A Project B Which project should you choose? Project A Project B
еВook Problem Walk-Through A company has a 12% WACC and is considering two mutually exclusive investments (that cannot be repeated) with the following cash flows: 1 2 3 4 5 7 Project A -$300 -$387 -$193 -$100 $600 $600 $850 -$180 Project B -$400 $133 $133 $133 $133 $133 $133 $0
Question 16 of 30 View Policies Current Attempt in Progress -/0.35 ⠀ Crane Crafts Corp. management is evaluating two independent capital projects that will each cost the company $200,000. The two projects will provide the following cash flows: Year Project A Project B 1 $66,750 $26,450 2 93,450 66,125 3 34,235 143,250 4 151,655 98,110 (a1) What is the payback period of both projects? (Round answers to 2 decimal places, e.g. 15.25.) The Payback of Project A is years and Project B is eTextbook and Media Save for Later Using multiple attempts will impact your score. 20% score reduction after attempt 2 years. Attempts: 0 of 3 used Submit Answer (a2) The parts of this question must be completed in order. This part will be available when you complete the part above. Search ♡
Ch 12-Assignment - Cash Flow Estimation and Risk Analysis Year 0: -$20,000 Year 0: -$40,000 Year 1: 11,000 Year 1: 8,000 Year 2: 17,000 Year 2: 15,000 Year 3: 16,000 Year 3: 14,000 Year 4: 13,000 Year 5: 12,000 Year 6: 11,000 O $14,072 O $10,163 $15,635 O $17,199 O $12,508 Luthering Corp. is considering a five-year project that has a weighted average cost of capital of 14% and a NPV of $80,720. Luthering Corp. can replicate this project indefinitely. What is the equivalent annual annuity (EAA) for this project? $21,161 $23,512 O $25,863 O $29,390 O $28,214
TOPIC 6: CAPITAL BUDGETING TECHNIQUES ABC Manufacturing is considering two (2) mutually exclusive investments. The company wishes to use a CAPM-Type risk-adjusted discount rate (RADR) in its analysis. ABC's managers believe that the appropriate market rate of return is 10%, and they observe that the current risk-free rate of return is 5%. Cash flows associated with the two (2) projects are shown in the table below Project x $110,000 Project y $120,000 Year Net Cash Inflows (NCFt) 1 $40,000 $32,000 2 $40,000 $42,000 3 $40,000 $48,000 4 $40,000 $56,000 Answer the following questions: a. Use a risk-adjusted discount rate approach to calculate the net present value of each project, given that project X has a RADR factor (Risk Index) of 1.20 and project Y has an RADR factor (Risk Index) of 1.4. Please note that the RADR factors are similar to project betas. b. Discuss your findings in part a and recommend the preferred project.
eBook Problem 22-11 Investments Quick and Slow cost $1,000 each, are mutually exclusive, and have the following cash flows. The firm’s cost of capital is 7 percent. Cash Inflows Q S Year 1 $1,100 $309 2 — 309 3 — 309 4 — 309 According to the net present value method of capital budgeting, which investment(s) should the firm make? Use Appendix B and Appendix D to answer the question. Use a minus sign to enter negative values, if any. Round your answers to the nearest cent. NPV (Investment Quick): $ NPV (Investment Slow): $ The firm should make investment(s) . According to the internal rate of return method of capital budgeting, which investment(s) should the firm make? Use Appendix D to answer the question. Round your answers to the nearest whole number. IRR (Investment Quick): % IRR (Investment Slow): % The firm should make investment(s) . If Q is chosen, the $1,100 can be reinvested and earn 8 percent. Does this information…
Problem 7-19 Comparing Investment Criteria The treasurer of Tropical Fruits, Inc., has projected the cash flows of Projects A, B, and C as follows: Year Project A Project B Project C 0 −$ 195,000 −$ 325,000 −$ 195,000 1 145,000 238,000 155,000 2 145,000 238,000 125,000 Suppose the relevant discount rate is 12 percent per year. a. Compute the profitability index for each of the three projects. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) b. Compute the NPV for each of the three projects. a.Project A profitablity index Project B profitability index Project C profitability index b.Project A NPV Project B NPV Project C NPV

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