What is Project A's Discounted Payback Period? Use the following information to answer the next 3 questions:Given the cash flow of two projects, A and B:CashFlowYear 0Year 1Year 2Year 3Year 4Year 5Year 6Project A-$14,000$7,000$7,000$7,000$7,000$7,000$7,000Project B-$95,000$19,000$9,500$38,000$28,000$20,000$10,000The firm's weighted average cost of capital is 10%. The firm's required payback anddiscounted payback period is 3 years.

Answered: Image /qna-images/answer/56eb0977-ce35-47c5-9856-80fc43e8ba59.jpg

Answered: Given the cash flow of two projects, A…

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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The following are the cash flows of two projects: Year 0 1 2 3 4 Project A $ (220) 100 100 100 100 Project B $ (220) 120 120 120 What are the internal rates of return on projects A and B? Note: Enter your answers as a percent rounded to 2 decimal places. Project A B IRR % %
Based on the cash flows given below, calculate the PI of a project that has a required rate of return of 12 percent. Also, indicate whether the project should be accepted. (Round answer to 2 decimal places, e.g. 25.25.) Year 0: -$94,000 Year 1: $19,000 Year 2: $36,000 Year 3: -$16,000 Year 4: $103,000 PI Type your answer here Accept project Choose your answer here
6. You are choosing between two projects. The cash flows for the projects are given in the following Data table ($ million): Project Year 0 Year 1 Year 2 Year 3 Year 4 A −$48 $27 $19 $22 $15 B −$100 $22 $39 $48 $62 The IRR for project A is __________________________%. (Round to one decimal place.) The IRR for project B is____________________________%.(Round to one decimal place.) If your discount rate is 5.4%, the NPV for project A is $_______________million.(Round to two decimal places.) If your discount rate is 5.4%, the NPV for project B is $______________ million.(Round to two decimal places.) NPV and IRR rank the two projects differently because they are measuring different things. ___________________is measuring value creation, while ___________________is measuring return on investment. Because returns do not scale with different levels of investment, the two measures may give different rankings when…
(Click on the following icon in order to copy its contents into a spreadsheet.) Year 1 Year 2 Year 3 Year 0 -$50 -$101 $26 $20 $22 $22 $39 $49 Project A B Year 4 $16 $62 You are choosing between two projects. The cash flows for the projects are given in the following table ($ million): a. What are the IRRs of the two projects? b. If your discount rate is 5.2%, what are the NPVs of the two projects? c. Why do IRR and NPV rank the two projects differently?
The following are the cash flows of two projects: Year O1234 0 Project A $ (340) Project B $ (340) 170 240 170 240 170 240 170 What is the payback period of each project? Note: Round your answers to 1 decimal place. > Answer is complete but not entirely correct. Project A Payback Period 2.0 years B 2.8 years
Your boss hands you the following information for a pair of mutually exclusive projects and asks for your recommendation. What should you do? Cash Flows Project A B Cost of Capital 10% 10% IRR 38% 22% Year 0 $10,000 $10,000 The NPV of project A is $. and the NPV of project B is $ (Round to two decimal places as needed.) Year 1 58000 $2600 Year 2 $5000 $6000 Using the NPV rule, project Year 3 $4000 $7000 should be selected.
Refer to two projects with the following cash flows: Project A -$150 65 65 65 65 Year e Project B -$150 75 75 75 If the opportunity cost of capital is 8%, what is the profitability index for each project? (Round your answers to 4 decimal places.) Project A Project B Does the profitability index rank the projects A and B correctly? (Click to select)
You have 3 projects with the following cash flows: (Click on the following icon in order to copy its contents into a spreadsheet.) Year 1 4 Project 1 Project 2 Project 3 - $151 $21 $40 $59 $81 - 827 7,008 - 6,502 21 40 59 80 - 243 a. For which of these projects is the IRR rule reliable? b. Estimate the IRR for each project (to the nearest 1%). c. What is the NPV of each project if the cost of capital is 5%? 20%? 50%? a. For which of these projects is the IRR rule reliable? (Select from the drop-down menus.) The IRR rule is reliable for V. Unless all of the cash flows of the project precede the ones, the IRR rule may give the wrong answer and should not be used. Furthermore, there may be multiple IRRS or the IRR may not exist. b. Estimate the IRR for each project (to the nearest 1%). The IRR for project 1 is %. (Round to the nearest integer.) The IRR for project 2 is %. (Round to the nearest integer.) The IRR for project 3 is %. (Round to the nearest integer.) c. What is the NPV of each…
The following are the cash flows of two projects: Project B Year Project A 0 $ (235) $ (235) 115 135 115 135 115 135 115 1234O 1 2 3 4 What are the internal rates of return on projects A and B? Note: Enter your answers as a percent rounded to 2 decimal places. Project A B IRR % %
Consider the following: Year Cash Flow 0 -$8,000 1 $200 2 $400 3 ? 4 $500 5 $700 The required rate of return is 8%. Find the minimum amount you would have to receive as a cash flow in year 3 and still recommend the project. Answer to 2 decimals places. 8,349.32
The cost data for two projects are given below. (a) Draw the cashflow diagram of Project 1. (b) Determine the better alternative using the annual cash flow analysis. Project 1 Project 2 $200,000 $180,000 24,000 Initial cost Net Annual Benefit 30,000 Salvage value Life in years 45,000 20,000 13 10 MARR 6%
Taggart Inc. is considering a project that has the following cash flow data. What is the project's payback? Year 0 3 Cash flows -$1,100 $500 Group of answer choices 2.50 years 2.20 years 2.70 years 2.07 years 1.86 years 1 $500 2 $500

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