Using the "gold standard" of investment criteria, which project should be selected? Project NPV Investment A...
Using the "gold standard" of investment criteria, which project should be selected?
Project NPV Investment
A $ 2.3 mil $ 5.2 mil
B $ 1.2 mil $ 2.8 mil
C $ 3.5 mil $ 6.9 mil
D $ 4.4 mil $ 8.9 mil
Multiple Choice
Project A
Project B
Project C
Project D
Homework Answers
Gold Standard of investment criteria is NPV.
Therefore investment with highest NPV should be selected.
Therefore option D is correct where Project NPV is $ 4.4 million
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Using the "gold standard" of investment criteria, which project
should be selected?
Project NPV Investment
A...
Using the Profitability Index rule, which of the four projects is the best investment? Project NPV...
Using the Profitability Index rule, which of the four projects is the best investment? Project NPV Investment A $ 2.3 mil $ 5.2 mil B $ 1.2 mil $ 2.8 mil C $ 3.5 mil $ 6.9 mil D $ 4.4 mil $ 8.9 mil Multiple Choice Project A Project B Project C Project D
1. A. Which of the following mutually exclusive projects should be accepted? Project NPV Payback IRR...
1. A. Which of the following mutually exclusive projects should be accepted? Project NPV Payback IRR A +42,176 2 years, +$10,500 16.4% B +39,090 2 years, +9,670 15.8% C +41,894 3 years, +16,620 13.2% D +43,778 3 years, +11,625 14.9% E +38,952 2 years, +15,475 15.9% B. What is the Payback Period of a project with an initial cost of $75,000, Year 1 cash flow of $20,000 which increases by 5% each year? If the Payback cutoff is 3 years,...
Which of the following criteria should be used to choose a project if there is a...
Which of the following criteria should be used to choose a project if there is a conflict between two mutually exclusive projects? A. The project whose payback period is equal to the expected years required to recover the original investment should be chosen. B. The project whose internal rate of return is higher than its modified internal rate of return should be chosen. C. The project whose discounted payback period is longer than its traditional payback period should be chosen....
Assume you computed the NPV of a project using nominal values. Your partner computed the NPV...
Assume you computed the NPV of a project using nominal values. Your partner computed the NPV of the identical project using real values, given a positive rate of inflation. When you compare your results, you should discover that Multiple Choice a) your NPV value is greater than your partner’s NPV value. b) your NPV values are identical. c) your partner’s initial cash flow at Time 0 is less than the value you used for Time 0. d) the discount rate...
Comparing the NPV profile of an investment project to that of a financing project demonstrates why...
Comparing the NPV profile of an investment project to that of a financing project demonstrates why the: a. incremental IRR varies with changes in the market rate of interest. b. IRR decision rule for investment projects is the opposite of the rule for financing projects. c. life span of a project affects the decision as to which project to accept. d. NPV rule for financing projects is the opposite of the rule for investment projects. e. profitability index and the...
Use investment criteria and capital budgeting techniques to evaluate the following project. The project involves equipment...
Use investment criteria and capital budgeting techniques to evaluate the following project. The project involves equipment that costs $300,000 and will last five (5) years before it must be replaced. The 5 year project is expected to produce after-tax cash flows of $60,000 in the first year, and increase by $20,000 annually; the after-tax cash flow in year 5 will reach $140,000. The equipment will have no salvage value after five-years. The discount rate is 15%. Do not forget to...
CHAPTER 8 Net Present Value and Other Investment Criteria 21. NPV and Payb exclusive projects a Payback Period. Kale...
CHAPTER 8 Net Present Value and Other Investment Criteria 21. NPV and Payb exclusive projects a Payback Period. Kaleb Konstruction, Inc., has the following mutually S ects available. The company has historically used a three-year cutoff rojects. The required return is 10 percent. Year домо Project F -$150,000 78,000 54,000 68,000 60,000 54,000 Project G -$235,000 54,000 72,000 103,000 139,000 156,000 2. Calculate the payback period for both projects. b. Calculate the NPV for both projects. c. Which project, if...
Assume a project has normal cash flows. Given this, you should accept the project Multiple Choice...
Assume a project has normal cash flows. Given this, you should accept the project Multiple Choice a) if the total cash inflows exceed the initial cash outflow. b) if, and only if, the NPV is exactly equal to zero. c) if the NPV is positive and reject it if the NPV is negative. d) only if the NPV is equal to the initial cash flow. e) because it has positive cash flows for every time period after the initial investment
Explain the difference in project selection using NPV verses IRR. Which is preferred by managers and by investment entit...
Explain the difference in project selection using NPV verses IRR. Which is preferred by managers and by investment entities and why?
18. Comparing Investment Criteria Consider the following cash flows of two mutually exclusive projects for Tokyo...
18. Comparing Investment Criteria Consider the following cash flows of two mutually exclusive projects for Tokyo Rubber Company. Assume the discount rate for both projects is 8 percent. Year Dry Prepreg Solvent Prepreg -$1,700,000 1,100,000 900,000 --$750,000 375,000 600,000 390,000 750,000 a. Based on the payback period, which project should be taken? b. Based on the NPV, which project should be taken? c. Based on the IRR, which project should be taken? d. Based on this analysis, is incremental IRR...
CHAPTER 8 Net Present Value and Other Investment Criteria 21. NPV and Payb exclusive projects a Payback Period. Kaleb Konstruction, Inc., has the following mutually S ects available. The company has historically used a three-year cutoff rojects. The required return is 10 percent. Year домо Project F -$150,000 78,000 54,000 68,000 60,000 54,000 Project G -$235,000 54,000 72,000 103,000 139,000 156,000 2. Calculate the payback period for both projects. b. Calculate the NPV for both projects. c. Which project, if...
18. Comparing Investment Criteria Consider the following cash flows of two mutually exclusive projects for Tokyo Rubber Company. Assume the discount rate for both projects is 8 percent. Year Dry Prepreg Solvent Prepreg -$1,700,000 1,100,000 900,000 --$750,000 375,000 600,000 390,000 750,000 a. Based on the payback period, which project should be taken? b. Based on the NPV, which project should be taken? c. Based on the IRR, which project should be taken? d. Based on this analysis, is incremental IRR...
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