Homework Answers
Part (a)
We will make use of the excel function NPV to calculate the NPV of each of the project. The usage of excel formula has been shown in the blue colored cell in the snapshot below. Yellow colored cells contain your answers.
Project Alpha has higher NPV than Project Beta. Hence, based on NPV, I will choose the project Alpha.
Part (b)
IRR is the discount rate at which NPV is zero. Hence, at IRR, the NPV value will be zero.
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Consider the following two projects: Year 0 Year 1 Year 2 Year 3 Year 4 Year...
Consider the following two projects: Project Year 0 Year 1 Year 2 Year 3 Year 4...
Consider the following two projects: Project Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Discount C/F C/F C/F C/F C/F C/F C/F C/F Rate Alpha - 79 20 25 30 35 40 NA NA 15% Beta - 80 25 25 25 25 25 25 25 16% Assume that projects Alpha and Beta are mutually exclusive. The correct investment decision and the best rationale for that decision is to O A invest in...
Consider the following two projects: Year 0 Year 1 Year 2 Year 3 Year 4 Year...
Consider the following two projects: Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Project C/F C/F C/F C/F C/F C/F C/F C/F Alpha - 79 20 25 30 35 40 NA N/A Beta -80 25 25 25 25 25 25 25 Discount Rate 14% 15% The net present value (NPV) for project beta is closest to:
Consider the following two projects: Year 0 Yearl Year 2 Year 3 Year 4 Year 5...
Consider the following two projects: Year 0 Yearl Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Discount Project C/E C/F C/E C/E C/F C/E C/F C/F Rate Alpha -79 20 25 30 35 40 N/A N/A 15% Beta -80 25 25 25 25 25 25 25 16% Which of the following statements is correct? Select one: A. You should invest in project Alpha since IRRAlpha > IRRBeta. B. You should invest in project Beta since NPVBeta...
This Question: 1 pt Consider the following two projects: Year 0 Year 1 Year 2 Year...
This Question: 1 pt Consider the following two projects: Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Discount Project C/F C/F CIF CIF C/F CIF CIF CIF Rate Alpha - 79 20 25 35 40 NA NA 12% Beta 80 25 25 25 25 25 25 13% 30 25 The net present value (NPV) for project beta is closest to: O A. $31 O B. $37 O C. $24 D. $21
I need the solution step by step for this question please, Consider the following two projects...
I need the solution step by step for this question please, Consider the following two projects and choose the correct answer: Year 0 Year1 Year2 Year3 Year4 Year5 Year6 Year7 Discount Rate project C/F C/F C/F C/F C/F C/F C/F C/F Alpha - 79 20 25 30 35 40 N/A N/A 15% Beta - 80 25 25 25 25 25 25 25 16% The internal rate of return (IRR) for project Alpha is closest to: () 24.5% ()...
XYZ Enterprises is deciding whether to expand its production facilities. Although long-term cash flows are difficult...
XYZ Enterprises is deciding whether to expand its production facilities. Although long-term cash flows are difficult to estimate, management has projected the following cash flows for the first two years in millions of dollars: Items Revenues Costs of Good soles and operating expenses Depreciation Increase in net working capital Capital expenditures Marginal corporate tax rate Unlevered Net Income Year 1 106.5 47.7 25.9 3.1 29.1 40% 19.7 Year 2 159.9 59.9 35.5 7.6 43.8 40% 38.9 a. What are the...
Consider the following two projects: Project Year 0 Year 1 Year 2 Year 3 Year 4...
Consider the following two projects: Project Year 0 Year 1 Year 2 Year 3 Year 4 Cash Flow Cash Flow Cash Flow Cash Flow Cash Flow A - 100 40 50 60 N/A B -73 30 30 30 30 Discount Rate 0.1 0.1 The net present value (NPV) of project A is closest to: A. 28.5 B. 56.9 C. 25 D. 22.8
Romboski, LLC, has identified the following two mutually exclusive projects: Year 0 1 2 3 4...
Romboski, LLC, has identified the following two mutually exclusive projects: Year 0 1 2 3 4 Cash Flow (A) Cash Flow (B) -$69,000 - $69,000 45,000 31,100 39,000 35,100 25,500 41,000 15,800 24,100 Requirement 1: (a) What is the IRR for each of these projects? (Do not round intermediate calculations. Enter your answer as a percentage roundedto 2 decimal places (e.g., 32.16).) Internal rate of return % % Project A Project B (b)If you apply the IRR decision rule, which...
Your firm is considering two projects with the following cash flows: Cash flows from project B...
Your firm is considering two projects with the following cash flows: Cash flows from project B (£000) (500) 200 250 170 25 30 Year Cash flows from project A (£000) 0(500) 167 180 160 100 100 4 1. Calculate the ARR and payback rule 2. If the appropriate discount rate is 12%, rank the two projects 3. Which project is preferred if you rank by IRR? 4. Calculate the discount rate (r) for which the NPVs of both projects are...
Bumble's Bees, Inc., has identified the following two mutually exclusive projects: Cash Flow (A) ...
PLEASE SHOW WORK AND CALCULATIONS THANKS
Bumble's Bees, Inc., has identified the following two mutually exclusive projects: Cash Flow (A) Cash Flow (B) Year 0 17,000 8,000 7,000 5,000 3,000 17,000 2,000 5,000 4 What is the IRR for each of these projects? If you apply the IRR decision rule, which project should the company accept? Is this decision necessarily correct? If the required return is 11%, what is the NPV for each of these projects? which project will you...
Consider the following two projects: Project Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Discount C/F C/F C/F C/F C/F C/F C/F C/F Rate Alpha - 79 20 25 30 35 40 NA NA 15% Beta - 80 25 25 25 25 25 25 25 16% Assume that projects Alpha and Beta are mutually exclusive. The correct investment decision and the best rationale for that decision is to O A invest in...
Consider the following two projects: Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Project C/F C/F C/F C/F C/F C/F C/F C/F Alpha - 79 20 25 30 35 40 NA N/A Beta -80 25 25 25 25 25 25 25 Discount Rate 14% 15% The net present value (NPV) for project beta is closest to:
Consider the following two projects: Year 0 Yearl Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Discount Project C/E C/F C/E C/E C/F C/E C/F C/F Rate Alpha -79 20 25 30 35 40 N/A N/A 15% Beta -80 25 25 25 25 25 25 25 16% Which of the following statements is correct? Select one: A. You should invest in project Alpha since IRRAlpha > IRRBeta. B. You should invest in project Beta since NPVBeta...
This Question: 1 pt Consider the following two projects: Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Discount Project C/F C/F CIF CIF C/F CIF CIF CIF Rate Alpha - 79 20 25 35 40 NA NA 12% Beta 80 25 25 25 25 25 25 13% 30 25 The net present value (NPV) for project beta is closest to: O A. $31 O B. $37 O C. $24 D. $21
XYZ Enterprises is deciding whether to expand its production facilities. Although long-term cash flows are difficult to estimate, management has projected the following cash flows for the first two years in millions of dollars: Items Revenues Costs of Good soles and operating expenses Depreciation Increase in net working capital Capital expenditures Marginal corporate tax rate Unlevered Net Income Year 1 106.5 47.7 25.9 3.1 29.1 40% 19.7 Year 2 159.9 59.9 35.5 7.6 43.8 40% 38.9 a. What are the...
Consider the following two projects: Project Year 0 Year 1 Year 2 Year 3 Year 4 Cash Flow Cash Flow Cash Flow Cash Flow Cash Flow A - 100 40 50 60 N/A B -73 30 30 30 30 Discount Rate 0.1 0.1 The net present value (NPV) of project A is closest to: A. 28.5 B. 56.9 C. 25 D. 22.8
Romboski, LLC, has identified the following two mutually exclusive projects: Year 0 1 2 3 4 Cash Flow (A) Cash Flow (B) -$69,000 - $69,000 45,000 31,100 39,000 35,100 25,500 41,000 15,800 24,100 Requirement 1: (a) What is the IRR for each of these projects? (Do not round intermediate calculations. Enter your answer as a percentage roundedto 2 decimal places (e.g., 32.16).) Internal rate of return % % Project A Project B (b)If you apply the IRR decision rule, which...
Your firm is considering two projects with the following cash flows: Cash flows from project B (£000) (500) 200 250 170 25 30 Year Cash flows from project A (£000) 0(500) 167 180 160 100 100 4 1. Calculate the ARR and payback rule 2. If the appropriate discount rate is 12%, rank the two projects 3. Which project is preferred if you rank by IRR? 4. Calculate the discount rate (r) for which the NPVs of both projects are...
PLEASE SHOW WORK AND CALCULATIONS THANKS
Bumble's Bees, Inc., has identified the following two mutually exclusive projects: Cash Flow (A) Cash Flow (B) Year 0 17,000 8,000 7,000 5,000 3,000 17,000 2,000 5,000 4 What is the IRR for each of these projects? If you apply the IRR decision rule, which project should the company accept? Is this decision necessarily correct? If the required return is 11%, what is the NPV for each of these projects? which project will you...
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