2.13FB Company is considering investing in two constructionprojects, and he developed the following estimates of thecash flows. His required return is 10% and views thesensweredut ofprojects as equally risky.Project 1 cash flows-$550,000Project 2 cash flows-%24700,000uestionYear$150,0001.000'000$150,000$150,000000'000$150,000000'osz$4000'OST$000'OST$000'00T$Required:a) Calculate the net present value (NPV) of each project,assess its acceptability, and indicate which project is bestusing NPV.b) Calculate the profitability index (PI) of each project,assess its acceptability, and indicate which project is bestusing Pl.c) If both the projects have recorded a positive NPV valueand the projects are mutually exclusive, which projectswould you recommend for FB Company to undertake?Why?謝近 0N

NPV is the difference between present value of all cash inflows and initial investment NPV =PV of…

Answered: 2. 13 FB Company is considering…

Financial And Managerial Accounting

15th Edition

ISBN:9781337902663

Author:WARREN, Carl S.

Publisher:WARREN, Carl S.

Chapter26: Capital Investment Analysis

Section: Chapter Questions

Problem 3CMA

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4. A firm evaluates all of its projects by applying the IRR rule. A project under consideration has the following cash flows: Year 0 1 2 3 Cash Flow -$ 41,000 20,000 23,000 14,000 a. If the required return is 14 percent, what is the IRR for this project? b. Should the firm accept the project?
6. Joliet Company is considering two alternative investments. The company requires an 18% return from its investments. Category Initial Investment Net cash flows anticipated: Year 1 Year 2 Year 3 Year 4 Year 5 Project X 108,000 36,000 39,000 32,000 34,000 25,000 Compute the IRR for both Projects and recommend one of them. Project Y $98,000 25,000 45,000 42,000 28,000 17,000
X construction is considering two projects to develop. The estimated net cash flow from each project is as follows:YearProject X ($)Project Y ($)1110,00075,000265,000150,0003100,00060,0004115,00055,000535,00060,000Total425,000400,000Each project requires an investment of $ 200,000. The cost of capital is 10%.Require toa) Calculate Net Present Value, Payback period, ARR and Profitability Index.b) Which Project is to be recommended to develop based on NPV, Profitability Index, Payback period and ARR? Suggest
16. Rayver Cruz is considering a project that has the following cash flow and WACC data. What is the project's MIRR? WACC: 11.00% Year 0 1 2 3 Cash flows −$800 $350 $350 $350 Group of answer choices 8.86% 12.15% 9.84% 13.50% 10.94%
Kabul Storage is considering a project that has the following cash flow data. What is the project's IRR? If the company’s cost of capital is 12% should the project be accepted? Explain. Year 0 1 2 3 Cash flows -$1,100 $450 $470 $490
Viva's Junkshop is considering a project that has the following cash flow and WACC data. What is theproject's NPV? WACC: 10.00% Year. 0 1 2 3 Cash flows. -$1.050 $450 $460 $470 $112.28 $92.37 $6.99 $106.93 $101.84
5. A firm evaluates all of its projects by applying the NPV rule. A project under consideration has the following cash flows: Year 0 1 2 3 Cash flow $ -34,000 16,000 18,000 15,000 If the required return is 12 percent, what is the NPV for this project? Should the firm accept the project? Explain. What is the NPV for this project if the required return is 35 percent? Should the firm accept the project? Explain. Round your answer to 2 decimal places.
Q2. Lamar Company is considering two projects A and B with the same initial investment of $10,000The following information regarding the cash inflows of the projects are given. Required rate of return is 12%. Year Cash inflows (A) 3,500 3,500 4,000 3.500 1,300 5 1,800 2,000 A. Calculate the project payback (PB) period for each project and discuss the most profitable project based on PB. ( B. Calculate Discounted Payback Period (DPB) discuss the most profitable project based on DPB = 2 3 FORRADINGEBAREFEREND Cash inflows (B) 3,000 3,500 2,000 C. Compute the project's Profitability index (PI) discuss the most profitable project based on PI.
Viva’s Junkshop is considering a project that has the following cash flow and WACC data. What is the project's NPV? WACC: 10.00% Year 0 1 2 3 Cash flows −$1,050 $450 $460 $470 $ 92.37 $101.84 $ 96.99 $112.28 $106.93
6. a. A project has an investment proposal with the following characteristics:Period Cash outflows Cash inflows0 Tk. 10,000 -1 12,000 -2 - Tk. 12,0003 - 10,000Compute the project’s profitability index using hurdle rate of 5 percent. Decidewhether the project is acceptable or not. 05b. ‘Gilford Mild Company’ is considering new product line to supplement its rangeline. It is anticipated that the new line will involve cash investment of Tk.500,000 at the initial time period and Tk. 600,000 in the 1st year. After-tax cashinflows of Tk. 400,000 are expected in the 2nd year and Tk. 500,000 each yearthereafter through the 11th year. While the product line might be viable after the11th year, the company prefers to be conservative and calculates at that time.Determine IRR. Is the project acceptable if hurdle rate is 14 percent?
onsider the following projects: Project Cash Flows ($) C0�0 C1�1 C2�2 C3�3 C4�4 C5�5 A −2,600 2,600 0 0 0 0 B −5,200 2,600 2,600 5,600 2,600 2,600 C −6,500 2,600 2,500 0 2,600 2,600 If the opportunity cost of capital is 10%, which project(s) have a positive NPV? Calculate the payback period for each project. Which project(s) would a firm using the payback rule accept if the cutoff period is three years?
Consider the following cash flows: Year 0 1 2 3 4 5 6 Cash Flow -$9,000 $2,000 $3,600 $2,700 $2,100 $2,100 $1,600 C. IRR. Calculate the IRR for this project. The company’s required rate of return is 10%. Should it be accepted or rejected? D. NPV. Using a 10% required rate of return, calculate the NPV for this project. Should it be accepted or rejected? E. PI. Calculate the Profitability Index (PI) for this project. Should it be accepted or rejected?

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