Homework Answers
Solution:
| Computation of Profitability index | ||||||||
| Discount rate 10% | Discount rate 15% | Discount rate 22% | ||||||
| Particulars | Period | Amount | PV Factor | Present Value | PV Factor | Present Value | PV Factor | Present Value |
| Cash outflows: | ||||||||
| Initial investment | 0 | $14,000.00 | 1 | $14,000 | 1 | $14,000 | 1 | $14,000 |
| Present Value of Cash outflows (A) | $14,000 | $14,000 | $14,000 | |||||
| Cash Inflows | ||||||||
| Year 1 | 1 | $7,300.00 | 0.90909 | $6,636 | 0.86957 | $6,348 | 0.81967 | $5,984 |
| Year 2 | 2 | $6,900.00 | 0.82645 | $5,702 | 0.75614 | $5,217 | 0.67186 | $4,636 |
| Year 3 | 3 | $5,700.00 | 0.75131 | $4,282 | 0.65752 | $3,748 | 0.55071 | $3,139 |
| Present Value of Cash Inflows (B) | $16,621 | $15,313 | $13,758 | |||||
| Net Present Value (NPV) (B-A) | $2,621 | $1,313 | -$242 | |||||
| Profitability index (NPV / Initial investment) | 0.19 | 0.09 | -0.02 | |||||
Add Answer to:
Question 15 answered
a. If the company requires a 12 percent return on its investments, should...
Need Question 9 answered! book contents p to pg go search ebook gc Click here for...
Need Question 9 answered!
book contents p to pg go search ebook gc Click here for a description of Table: Questions and Problems 7. 8. Calculating NPV (LO1) For the cash flows in the previous problem, suppose the firm uses the NPV decision rule. At a required return of 11 percent, should the firm accept this project? What if the required return was 25 percent? 9. Calculating NPV and IRR (L01, 5) A project that provides annual cash flows of...
Help me do this 2010 Inc, imposes a payback cutoff of three years for its projects....
Help me do this 2010 Inc, imposes a payback cutoff of three years for its projects. If the company has the following two projects available, should it accept either of them? Assume cash flows occur evenly throughout the years. Year Cash Flow (A) Cash Flow (B) 0 -$25,000 -$52,000 1 20,000 14,000 2 26,000 17,000 3 18,000 11,000 4 6,000 240,000 Based on the below cash flows, Hello Ltd. uses the NPV decision rule. At a required return of 12...
12. NPV versus IRR (LO1, 5) Parkallen Inc. has identified the following two mutually exclusive projects:...
12. NPV versus IRR (LO1, 5) Parkallen Inc. has identified the following two mutually exclusive projects: m Cash Flow (A) Cash Flow (B) Year -$29,000 14,400 -$29000 0 1 4,300 2 12,300 q.800 4.200 15,200 4 5,100 16,800 Click here for a description of Table: Questions and Problems 12. a. What is the IRR for each of these projects? Using the IRR decision rule, which project should the company accept? Is this decision necessarily correct? b. If the required return...
discount rate is zero percent? What if the discount rate is 5 percent? If it is...
discount rate is zero percent? What if the discount rate is 5 percent? If it is 19 percent? 6. Calculating AAR (LO4) Youre trying to determine whether to expand your business by building a new manufacturing plant. The plant has an installation cost of $12 million, which will be depreciated straight-line to zero over its four-year life. If the plant has proiected net income of $1.854,300, $1,907.600, $1,876.000 and $1,329,500 over these four years, what is the project's average accounting...
Question 24 1 pts You are considering the following two mutually exclusive projects. Which project(s) should...
Question 24 1 pts You are considering the following two mutually exclusive projects. Which project(s) should be recommended? Project A Project B Year Cash Flow Year Cash Flow 0 $75,000 0 -$70,000 1 $19,000 1 $10,000 2 $48,000 2 $16,000 3 $12,000 3 $72,000 Required rate of return: 10 percent (for A) 13 percent (for B) O accept project B and reject project A. accept both project A and project B. O reject both project A and project B. O...
10. Calculating IRR [LO5] What is the IRR of the following set of cash flower Year...
10. Calculating IRR [LO5] What is the IRR of the following set of cash flower Year WN - O Cash Flow -$15,400 7,300 9,100 5,900 11. Calculating NPV [LO1] For the cash flows in the previous problem, what is the NPV at a discount rate of zero percent? What if the discount rate is 10 percent? If it is 20 percent? If it is 30 percent? 12. NPV versus IRR [LO1, 5] Bruin, Inc., has identified the following two mutually...
c. If the required return is 7 percent, what is the NPV for Project A? ...
c. If the required return is 7 percent, what
is the NPV for Project A?
d. If the required return is 7 percent, what
is the NPV for Project B?
e. At what discount rate would the company be
indifferent between these two projects?
Bruin, Inc., has identified the following two mutually exclusive projects: Year -o Cash Flow (A) -$41,000 19,400 14,900 12,400 9,400 Cash Flow (B) -$41,000 5,600 12.100 18,600 22,600 mt a. What is the IRR...
The Matterhorn Corporation is trying to choose between the following two mutually exclusive design projects: Year...
The Matterhorn Corporation is trying to choose between the following two mutually exclusive design projects: Year Cash Flow (I) Cash Flow (II) 0 –$ 88,000 –$ 56,000 1 37,900 11,400 2 48,000 35,500 3 28,000 29,500 a. If the required return is 11 percent, what is the profitability index for each project? Profitability index Project I Project II If the required return is 11 percent and the company applies the profitability index decision rule, which project should the firm accept...
3. You are considering two mutually exclusive projects with the following cash flows. Which project(s) should...
3. You are considering two mutually exclusive projects with the following cash flows. Which project(s) should you accept if the discount rate is 8.5 percent? What if the discount rate is 13 percent? Year Project A Project B -$80,000 -$80,000 31,000 31,000 0 31,000 110,000 A. accept project A as it always has the higher NPV B. accept project B as it always has the higher NPV C. accept A at 8.5 percent and B at 13 percent D. accept...
Problem 7-14 Problems with Profitability Index The Bosa Corporation is trying to choose between the following...
Problem 7-14 Problems with Profitability Index The Bosa Corporation is trying to choose between the following two mutually exclusive design projects: Year Cash Flow (1) -$ 66,000 29,000 29,000 29,000 Cash Flow (II) -$17,800 9,600 9,600 9,600 a-1 If the required return for both projects is 10 percent, what is the profitability Index for both projects? (Do not round Intermediate calculations and round your answers to 3 decimal places, e.g., 32.161.) Profitability Index Project I Project II a-2 If the...
Need Question 9 answered!
book contents p to pg go search ebook gc Click here for a description of Table: Questions and Problems 7. 8. Calculating NPV (LO1) For the cash flows in the previous problem, suppose the firm uses the NPV decision rule. At a required return of 11 percent, should the firm accept this project? What if the required return was 25 percent? 9. Calculating NPV and IRR (L01, 5) A project that provides annual cash flows of...
12. NPV versus IRR (LO1, 5) Parkallen Inc. has identified the following two mutually exclusive projects: m Cash Flow (A) Cash Flow (B) Year -$29,000 14,400 -$29000 0 1 4,300 2 12,300 q.800 4.200 15,200 4 5,100 16,800 Click here for a description of Table: Questions and Problems 12. a. What is the IRR for each of these projects? Using the IRR decision rule, which project should the company accept? Is this decision necessarily correct? b. If the required return...
discount rate is zero percent? What if the discount rate is 5 percent? If it is 19 percent? 6. Calculating AAR (LO4) Youre trying to determine whether to expand your business by building a new manufacturing plant. The plant has an installation cost of $12 million, which will be depreciated straight-line to zero over its four-year life. If the plant has proiected net income of $1.854,300, $1,907.600, $1,876.000 and $1,329,500 over these four years, what is the project's average accounting...
Question 24 1 pts You are considering the following two mutually exclusive projects. Which project(s) should be recommended? Project A Project B Year Cash Flow Year Cash Flow 0 $75,000 0 -$70,000 1 $19,000 1 $10,000 2 $48,000 2 $16,000 3 $12,000 3 $72,000 Required rate of return: 10 percent (for A) 13 percent (for B) O accept project B and reject project A. accept both project A and project B. O reject both project A and project B. O...
10. Calculating IRR [LO5] What is the IRR of the following set of cash flower Year WN - O Cash Flow -$15,400 7,300 9,100 5,900 11. Calculating NPV [LO1] For the cash flows in the previous problem, what is the NPV at a discount rate of zero percent? What if the discount rate is 10 percent? If it is 20 percent? If it is 30 percent? 12. NPV versus IRR [LO1, 5] Bruin, Inc., has identified the following two mutually...
c. If the required return is 7 percent, what
is the NPV for Project A?
d. If the required return is 7 percent, what
is the NPV for Project B?
e. At what discount rate would the company be
indifferent between these two projects?
Bruin, Inc., has identified the following two mutually exclusive projects: Year -o Cash Flow (A) -$41,000 19,400 14,900 12,400 9,400 Cash Flow (B) -$41,000 5,600 12.100 18,600 22,600 mt a. What is the IRR...
3. You are considering two mutually exclusive projects with the following cash flows. Which project(s) should you accept if the discount rate is 8.5 percent? What if the discount rate is 13 percent? Year Project A Project B -$80,000 -$80,000 31,000 31,000 0 31,000 110,000 A. accept project A as it always has the higher NPV B. accept project B as it always has the higher NPV C. accept A at 8.5 percent and B at 13 percent D. accept...
Problem 7-14 Problems with Profitability Index The Bosa Corporation is trying to choose between the following two mutually exclusive design projects: Year Cash Flow (1) -$ 66,000 29,000 29,000 29,000 Cash Flow (II) -$17,800 9,600 9,600 9,600 a-1 If the required return for both projects is 10 percent, what is the profitability Index for both projects? (Do not round Intermediate calculations and round your answers to 3 decimal places, e.g., 32.161.) Profitability Index Project I Project II a-2 If the...
Most questions answered within 3 hours.
-
A square current loop 5.4 cm on each side carries a 510 mA
current. The loop...
asked 2 hours ago -
What are five tips in conducting knowledge assessment/literature
review research? Each of these tips needs to...
asked 2 hours ago -
Antigen presenting cells link innate and adaptive immune
responses. In the theoretical scenario where phagosomes cannot...
asked 2 hours ago -
Dealing with conflict, in my opinion, is a skill and an art. I
believe that those...
asked 3 hours ago -
6. A long straight wire with circular cross section and radius
1.5 cm carries a 1.2...
asked 3 hours ago -
Deacon Corporation has provided the following financial data
from its balance sheet and income statement:
Year...
asked 4 hours ago -
List and discuss at least three variables from everyday life for
which you expect the variable ...
asked 4 hours ago -
A high-pass filter consists of a 1.60 μF capacitor in series
with a 125 Ω resistor....
asked 4 hours ago -
A newly developed artificial intelligence has trouble
distinguishing hand-written numbers from hand-written alphabets.
There are pictures...
asked 4 hours ago -
The carbonate ion CO3 2- has multiple resonance structures.
a. Draw them and assign the hybridization...
asked 4 hours ago -
In doing an allocation for a basket purchase
Use the individual costs and the total market...
asked 4 hours ago -
what were the social political and economic causes and impacts of
the late 19th century urban...
asked 4 hours ago