For the projects given in the table below to: • Classify the projects into simple investment or non-simple investment. Decide if project A is accepted or rejected based on the IRR criterion, at MARR of 20%. If projects C and D are mutually exclusive projects, determine which project is more economical at MARR of 70%. PROJECT CASH FLOW SR A C -4 000 -4 000 -125 000 -125 000 8 000 760 30 000 20 000 2 -3 000 4 000 30 000 40 000 3 120 000 130 000 NOTE: The general solution of a quadratic equation (aX? + bX +c = 0) is -bt vb2 - 4ac

For the projects given in the table below to: • Classify the projects into simple investment or non-simple investment. Decide if project A is accepted or rejected based on the IRR criterion, at MARR of 20%. If projects C and D are mutually exclusive projects, determine which project is more economical at MARR of 70%. PROJECT CASH FLOW SR A C -4 000 -4 000 -125 000 -125 000 8 000 760 30 000 20 000 2 -3 000 4 000 30 000 40 000 3 120 000 130 000 NOTE: The general solution of a quadratic equation (aX? + bX +c = 0) is -bt vb2 - 4ac

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter12: Capital Budgeting: Decision Criteria

Section: Chapter Questions

Problem 13P

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Start with the partial model in the file Ch10 P23 Build a Model.xlsx on the textbooks Web site. Gardial Fisheries is considering two mutually exclusive investments. The projects expected net cash flows are as follows: a. If each projects cost of capital is 12%, which project should be selected? If the cost of capital is 18%, what project is the proper choice? b. Construct NPV profiles for Projects A and B. c. What is each projects IRR? d. What is the crossover rate, and what is its significance? e. What is each projects MIRR at a cost of capital of 12%? At r = 18%? (Hint: Consider Period 7 as the end of Project Bs life.) f. What is the regular payback period for these two projects? g. At a cost of capital of 12%, what is the discounted payback period for these two projects? h. What is the profitability index for each project if the cost of capital is 12%?
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Consider the following two mutually exclusive projects:Year Cash Flow (X) Cash Flow (Y)0 -$365,000 -$38,0001 25,000 16,0002 65,000 12,0003 65,000 17,0004 425,000 15,000Whichever project you choose, if any, you require a 13 percent return on your investment. i. Which investment will you choose if you use the payback decision criteria? Justify your answer.ii. Which investment will you choose if you use the NPV decision criteria? Justify your answer.iii. Which project will you choose ultimately based on your answers above?
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