Homework Answers
Answer : Option - A, Choose the option with the lower cost on a net present value basis
Explanation :
In capital budgeting, mutually-exclusive projects are set of projects in which selection of one project automatically rejects other projects.
In case of mutually exclusive projects, the project with highest net present value is preferred.
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When comparing mutually exclusive capital investments, managers should: Multiple Choice 1 0 choose the option with...
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All techniques -Decision among mutually exclusive investments Pound Industries is attempting to select the best of three mutually exclusive projects. The initial investment and after-tax cash inflows associated with these projects are shown in the following table. Cash flows Initial investment (CF) Cash inflows (CF), t-1 to 5 $100,000 $30,000 Project A Project B $120,000 $41,000 Poject C $130,000 $42,500 a. Calculate the payback period for each project. b. Calculate the net present value (NPI) of each project, assuming that...
All techniques—Decision among mutually exclusive investments Pound Industries is attempting to select the best of three...
All
techniques—Decision among
mutually exclusive investments
Pound Industries is attempting to select the best of three
mutually exclusive projects. The initial investment and after-tax
cash inflows associated with these projects are shown in the
following table
a. Calculate the payback period for
each project.
b. Calculate the net present value
(NPV) of each project, assuming that the firm has a cost of
capital equal to 12%.
c. Calculate the internal rate of return
(IRR) for each project.
d. Indicate which...
All techniques-Decision among mutually exclusive investments Pound Industries is attempting to select the best of three...
All techniques-Decision among mutually exclusive investments Pound Industries is attempting to select the best of three mutually exclusive projects. The initial investment and after-tax cash inflows associated with these projects are shown in the following table. Cash flows Initial investment (CF) Cash inflows (CF), t= 1 to 5 Project $30,000 $10,000 Project B $60,000 $21,500 Project C $70,000 $22.500 a. Calculate the payback period for each project. b. Calculate the net present value (NPV) of each project, assuming that the...
NPVs and IRRs for Mutually Exclusive Projects Davis Industries must choose between a gas-powered and an...
NPVs and IRRs for Mutually Exclusive Projects Davis Industries must choose between a gas-powered and an electric-powered forklift truck for moving materials in its factory. Because both forklifts perform the same function, the firm will choose only one. (They are mutually exclusive investments.) The electric-powered truck will cost more, but it will be less expensive to operate; it will cost $21,000, whereas the gas-powered truck will cost $17,230. The cost of capital that applies to both investments is 11%. The...
Mutually exclusive investments and risk Personal Finance Problem Lara Fredericks is interested in two mutually exclusive investments. Both investments cover the same time horizon of 6 years. The cost of the first investment is $9,800, and Lara expects equal and consecutive year-end payments of $3,100. The second investment promises equal and consecutive payments of $4,400 with an initial outlay of $11,800 required. The current required return on the first investment is 8.8%, and the second carries a required return of...
0. Mutually Exclusive Investments. Here are the cash flow forecasts for two mutually exclu sive projects Cash Flows Dollars Yar Project A Project B $100 30 50 70 $100 49 49 49 a Which project would you choose if the opportunity cost of capital is 2 percent b. Which would you choose if the opportunity cost of capital is 12 percene e. Why does your answer change?
Which of the following is not one of the more common strategic benefits provided by capital investment projects? Multiple Choice Improving product quality Reducing the number of short-term (i.e., operational) decisions that management must make. Reducing manufacturing cycle time. Being able to deliver a product that competitors cannot (ie, product differentiation). Providing significant cost reductions, in terms of production and/or marketing costs. When ranking two mutually exclusive investments with different initial amounts but approximately the same useful life, and assuming...
Problem 1 (25 points) A manufacturing firm must choose between two mutually exclusive pieces of equipment for one of its production lines. The company uses an effective tax rate of 34% and an after-tax MARR of 10%. Which option should they select on an after-tax basis? Option 1 Option 2 Initial Cost $100,000 $300,000 Annual Net Revenues $40,000 $100,000 Salvage Value $25,000 $75,000 Depreciation Method MACRS Depreciable life 3 - year GDS Useful life 4 years CFAT EOY Tax CFBT...
All techniques -Decision among mutually exclusive investments Pound Industries is attempting to select the best of three mutually exclusive projects. The initial investment and after-tax cash inflows associated with these projects are shown in the following table. Cash flows Initial investment (CF) Cash inflows (CF), t-1 to 5 $100,000 $30,000 Project A Project B $120,000 $41,000 Poject C $130,000 $42,500 a. Calculate the payback period for each project. b. Calculate the net present value (NPI) of each project, assuming that...
All
techniques—Decision among
mutually exclusive investments
Pound Industries is attempting to select the best of three
mutually exclusive projects. The initial investment and after-tax
cash inflows associated with these projects are shown in the
following table
a. Calculate the payback period for
each project.
b. Calculate the net present value
(NPV) of each project, assuming that the firm has a cost of
capital equal to 12%.
c. Calculate the internal rate of return
(IRR) for each project.
d. Indicate which...
All techniques-Decision among mutually exclusive investments Pound Industries is attempting to select the best of three mutually exclusive projects. The initial investment and after-tax cash inflows associated with these projects are shown in the following table. Cash flows Initial investment (CF) Cash inflows (CF), t= 1 to 5 Project $30,000 $10,000 Project B $60,000 $21,500 Project C $70,000 $22.500 a. Calculate the payback period for each project. b. Calculate the net present value (NPV) of each project, assuming that the...
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