Put answer in table formatYokam Company is considering two alternative projects. Project 1 requires an initial investment of $560,000 and has a present value of cash flows of $2,200,000.0. Project 2 requires an initial investment of $5,000,000 and has a present value of cash flows of $7,000,000. 1. Compute the profitability index for each project.2. Based on the profitability index, which project should the company prefer? Required 1Required 2Compute the profitability index for each project.Profitability IndexChoose Numerator:Choose Denominator:Profitability IndexProfitability indexProject 1Project 2< Required 1Required 2 >Required 1Required 2Based on the profitability index, which project should the company prefer?Based on the profitability index, which project should the company prefer?< Required 1Required 2 >

Profitability index = Present value of cash flows/Initial investment

Yokam Company is considering two alternative projects. Project 1 requires an initial investment of $560,000 and has a present value of cash flows of $2,200,000.0. Project 2 requires an initial investment of $5,000,000 and has a present value of cash flows of $7,000,000. 1. Compute the profitability index for each project. 2. Based on the profitability index, which project should the company prefer?

Yokam Company is considering two alternative projects. Project 1 requires an initial investment of $560,000 and has a present value of cash flows of $2,200,000.0. Project 2 requires an initial investment of $5,000,000 and has a present value of cash flows of $7,000,000. 1. Compute the profitability index for each project. 2. Based on the profitability index, which project should the company prefer?

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 4P

See similar textbooks

Similar questions

Exercise 14-7 (Algo) Net Present Value Analysis of Two Alternatives [LO14-2] Perit Industries has $110,000 to invest. The company is trying to decide between two alternative uses of the funds. The alternatives are: Cost of equipment required Working capital investment required Annual cash inflows Salvage value of equipment in six years Life of the project Project A $ 110,000 $0 $ 20,000 $ 8,600 1. Net present value project A 2. Net present value project B 3. Which investment alternative (if either) would you recommend that the company accept? 6 years Project B $0 $ 110,000 $ 68,000 $0 6 years The working capital needed for project B will be released at the end of six years for investment elsewhere. Perit Industries' discount rate is 16%. Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using tables. Required: 1. Compute the net present value of Project A. (Enter negative values with a minus sign. Round your final answer to the nearest…
Compute the Profitability Index (PI) for each project? Project A Project B Profitability Index (PI) 5- In light of your answers above, suppose that these two projects might be mutually exclusive or independent. According to these two assumptions, fill in the blanks in the table below with the suitable answer: Points Investment Criteria If A and B are mutually exclusive, then I would select If A and B are independent, then I would select PBP NPV IRR PI
(question3 c,d) c) Calculate the profitability index (PI) for each project d) Calculate the internal rate of return (IRR) for each project.
McKnight Company is considering two different, mutually exclusive capital expenditure proposals. Project A will cost $533,000, has an expected useful life of 15 years, a salvage value of zero, and is expected to increase net annual cash flows by $72,300. Project B will cost $366,000, has an expected useful life of 15 years, a salvage value of zero, and is expected to increase net annual cash flows by $50,800. A discount rate of 9% is appropriate for both projects. Click here to view PV table. Compute the net present value and profitability index of each project. (If the net present value is negative, use either a negative sign preceding the number eg -45 or parentheses eg (45). Round present value answers to O decimal places, e.g. 125 and profitability index answers to 2 decimal places, e.g. 15.25. For calculation purposes, use 5 decimal places as displayed in the factor table provided.)
Dwight Donovan, the president of Campbell Enterprises, is considering two investment opportunities. Because of limited resources, he will be able to invest in only one of them. Project A is to purchase a machine that will enable factory automation; the machine is expected to have a useful life of four years and no salvage value. Project B supports a training program that will improve the skills of employees operating the current equipment. Initial cash expenditures for Project A are $102,000 and for Project B are $47,000. The annual expected cash inflows are $32,178 for Project A and $15,474 for Project B. Both investments are expected to provide cash flow benefits for the next four years. Campbell Enterprises' desired rate of return is 6 percent. (PV of $1 and PVA of $1) (Use appropriate factor(s) from the tables provided.) Required a. Compute the net present value of each project. Which project should be adopted based on the net present value approach? b. Compute the approximate…
1. Is Shaylee able to invest in all of these projects simultaneously? 2-A. Calculate the profitability index for each project. 2-B. What is Shaylee’s order of preference based on the profitability index?
Which term is used to represent the sales level that results in a project's net income exactly equalling zero? Group of answer choices Cash breakeven Operational breakeven Present value breakeven Financial breakeven Accounting profit breakeven
QUESTION 5 Invest in any or all of the four projects whose relevant cash flows are given in the following table. The firm has RM7,000,000 budgeted to fund these projects, all of which are known to be acceptable. Initial investment for each project is the same for all projects which is RM1,600,000. The rate of return for all projects is equivalent to 8%. Operating cash outflow Project X Year 1 Project Y Cash Outflow RM1,600,000 (for each project) Operating Cash Inflows RM 440,000 RM 140,000 1 340,000 220,000 (110,000) ( 95,000 ) 105,000 220,000 388,000 180,000 250,000 260,000 370,000 460,000 3. 4. 5. 6. 7. 8. 9. Use this table for PROJECT X and Y Period PVIF 8% 1 0.9259 2 0.8573 3 0.7938 4 0.7350 0.6806 6 0.6302 7 0.5835 8 0.5403 9 0.5002 10 0.4632 8
c) Calculate the profitability index (PI) for each project d) Calculate the internal rate of return (IRR) for each project.Note : No need excel formula !
Use attachment to answer question q3- This question relates to the diagram, which shows the NPV profile for Projects X and Y. What is the Internal Rate of Return of Project X? Select one: a. 13% b. 9% c. 4% d. 10%
Evaluation of Projects or ME Alternatives based on different Economic Worth Analysis: AW analysis of one project Choose... ROR analysis of two alternatives Choose... PW analysis of one project Choose... • ROR analysis of one project Choose... 0 PW analysis of ME Alternatives Choose... The remaining undepreciated capital investment in year t is called: Select one: O a BVt O b. P OC B O d. MV Although land is considered as real property, it is not depreciable. Select one: O True O False
i) Calculate the profitability index of each project