Hanmi Group, a consumer electronics conglomerate, is reviewing its annual budget in wireless technology. It is...
|
Hanmi Group, a consumer electronics conglomerate, is reviewing its annual budget in wireless technology. It is considering investments in three different technologies to develop wireless communication devices. Consider the following cash flows of the three independent projects available to the company. Assume the discount rate for all projects is 8 percent. Further, the company has only $27 million to invest in new projects this year. |
| Cash Flows (in $ millions) |
| Year | CDMA | G4 | Wi-Fi | ||||||
| 0 | –$ | 7 | –$ | 20 | –$ | 27 | |||
| 1 | 11 | 18 | 25 | ||||||
| 2 | 7.5 | 33 | 39 | ||||||
| 3 | 4.5 | 27 | 27 | ||||||
| a. |
Calculate the profitability index for each investment. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) |
| b. | Calculate the NPV for each investment. (Do not round intermediate calculations and enter your answer in dollars, not millions, rounded to 2 decimal places, e.g., 1,234,567.89) |
Homework Answers
Add Answer to:
Hanmi Group, a consumer electronics conglomerate, is reviewing
its annual budget in wireless technology. It is...
Hanmi Group, a consumer electronics conglomerate, is reviewing its annual budget in wireless technology. It is...
Hanmi Group, a consumer electronics conglomerate, is reviewing its annual budget in wireless technology. It is considering investments in three different technologies to develop wireless communication devices. Consider the following cash flows of the three independent projects available to the company. Assume the discount rate for all projects is 10 percent. Further, the company has only $31 million to invest in new projects this year. Cash Flows (in $ millions) Year CDMA G4 Wi-Fi 0 –$ 9 –$ 22 –$...
Problem 7-17 Profitability Index versus NPV Broxton Group, a consumer electronics conglomerate, is reviewing its annual...
Problem 7-17 Profitability Index versus NPV Broxton Group, a consumer electronics conglomerate, is reviewing its annual budget in wireless technology. It is considering investments in three different technologies to develop wireless communication devices. Consider the following cash flows of the three independent projects. Assume the discount rate is 9 percent. Further, the company has only $29 million to invest in new projects this year. Cash Flows (in $ millions) Year L6 G5 Wi-Fi 0 −$ 8.0 −$ 21 −$ 29...
Problem 7-17 Profitability Index versus NPV Broxton Group, a consumer electronics conglomerate, is reviewing its annual...
Problem 7-17 Profitability Index versus NPV Broxton Group, a
consumer electronics conglomerate, is reviewing its annual budget
in wireless technology. It is considering investments in three
different technologies to develop wireless communication devices.
Consider the following cash flows of the three independent
projects. Assume the discount rate is 10 percent. Further, the
company has only $18 million to invest in new projects this year.
Cash Flows (in $ millions) Year L6 G5 Wi-Fi 0 −$ 6.0 −$ 12 −$ 18...
Halloween, Inc., is considering a new product launch. The firm expects to have an annual operating...
Halloween, Inc., is considering a new product launch. The firm expects to have an annual operating cash flow of $8.4 million for the next 8 years. The discount rate for this project is 12 percent for new product launches. The initial investment is $38.4 million. Assume that the project has no salvage value at the end of its economic life. a. What is the NPV of the new product? (Do not round intermediate calculations and enter your answer in dollars,...
You are evaluating a proposed expansion of an existing subsidiary located in Switzerland. The cost of...
You are evaluating a proposed expansion of an existing subsidiary located in Switzerland. The cost of the expansion would be SF 21 million. The cash flows from the project would be SF 5.9 million per year for the next five years. The dollar required return is 14 percent per year, and the current exchange rate is SF 1.11. The going rate on Eurodollars is 4 percent per year. It is 2 percent per year on Euroswiss. Use the approximate form...
Bronco, Inc., imposes a payback cutoff of three years for its international investment projects. Year 0...
Bronco, Inc., imposes a payback cutoff of three years for its international investment projects. Year 0 1 Cash Flow (A) Cash Flow (B) -$54,000 $ 64,000 20,000 12,000 22,000 15,000 18,000 20,000 5,000 224,000 NM What is the payback period for both projects? (Round your answers to 2 decimal places, e.g., 32.16.) Project A Project B years years Which project should the company accept? Project A O Project B An investment project has annual cash inflows of $5,000, $3,300, $4,500,...
Problem 18-3 FTE Pompeii Pizza Club owns three identical restaurants popular for their specialty pizzas. Each...
Problem 18-3 FTE Pompeii Pizza Club owns three identical restaurants popular for their specialty pizzas. Each restaurant has a debt-equity ratio of 35 percent and makes interest payments of $61,000 at the end of each year. The cost of the firm's levered equity is 18 percent. Each store estimates that annual sales will be $1.56 million; annual cost of goods sold will be $840,000; and annual general and administrative costs will be $500,000. These cash flows are expected to remain...
M.V.P. Games, Inc., has hired you to perform a feasibility study of a new video game...
M.V.P. Games, Inc., has hired you to perform a feasibility study of a new video game that requires an initial investment of $71 million. The company expects a total annual operating cash flow of $1.31 million for the next 10 years. The relevant discount rate is 11 percent. Cash flows occur at year-end. a. What is the NPV of the new video game? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to...
Down Under Boomerang, Inc., is considering a new three-year expansion project that requires an initial fixed...
Down Under Boomerang, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $2.79 million. The fixed asset falls into the three-year MACRS class. The project is estimated to generate $2,110,000 in annual sales, with costs of $799,000. The project requires an initial investment in net working capital of $330,000, and the fixed asset will have a market value of $225,000 at the end of the project. If the tax rate is 35 percent,...
Consider the following project for Clapper, Inc. The company is considering a 4-year project to manufacture...
Consider the following project for Clapper, Inc. The company is considering a 4-year project to manufacture clap-command garage door openers. This project requires an initial investment of $15.5 million that will be depreciated straight-line to zero over the project’s life. An initial investment in net working capital of $950,000 is required to support spare parts inventory; this cost is fully recoverable whenever the project ends. The company believes it can generate $11.9 million in revenues with $4.6 million in operating...
Problem 7-17 Profitability Index versus NPV Broxton Group, a
consumer electronics conglomerate, is reviewing its annual budget
in wireless technology. It is considering investments in three
different technologies to develop wireless communication devices.
Consider the following cash flows of the three independent
projects. Assume the discount rate is 10 percent. Further, the
company has only $18 million to invest in new projects this year.
Cash Flows (in $ millions) Year L6 G5 Wi-Fi 0 −$ 6.0 −$ 12 −$ 18...
Halloween, Inc., is considering a new product launch. The firm expects to have an annual operating cash flow of $8.4 million for the next 8 years. The discount rate for this project is 12 percent for new product launches. The initial investment is $38.4 million. Assume that the project has no salvage value at the end of its economic life. a. What is the NPV of the new product? (Do not round intermediate calculations and enter your answer in dollars,...
You are evaluating a proposed expansion of an existing subsidiary located in Switzerland. The cost of the expansion would be SF 21 million. The cash flows from the project would be SF 5.9 million per year for the next five years. The dollar required return is 14 percent per year, and the current exchange rate is SF 1.11. The going rate on Eurodollars is 4 percent per year. It is 2 percent per year on Euroswiss. Use the approximate form...
Bronco, Inc., imposes a payback cutoff of three years for its international investment projects. Year 0 1 Cash Flow (A) Cash Flow (B) -$54,000 $ 64,000 20,000 12,000 22,000 15,000 18,000 20,000 5,000 224,000 NM What is the payback period for both projects? (Round your answers to 2 decimal places, e.g., 32.16.) Project A Project B years years Which project should the company accept? Project A O Project B An investment project has annual cash inflows of $5,000, $3,300, $4,500,...
Problem 18-3 FTE Pompeii Pizza Club owns three identical restaurants popular for their specialty pizzas. Each restaurant has a debt-equity ratio of 35 percent and makes interest payments of $61,000 at the end of each year. The cost of the firm's levered equity is 18 percent. Each store estimates that annual sales will be $1.56 million; annual cost of goods sold will be $840,000; and annual general and administrative costs will be $500,000. These cash flows are expected to remain...
M.V.P. Games, Inc., has hired you to perform a feasibility study of a new video game that requires an initial investment of $71 million. The company expects a total annual operating cash flow of $1.31 million for the next 10 years. The relevant discount rate is 11 percent. Cash flows occur at year-end. a. What is the NPV of the new video game? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to...
Most questions answered within 3 hours.
-
A sample of C3H8 has 1.60×1024 H atoms.
How many carbon atoms does the sample contain?...
asked 48 minutes ago -
How many unique codes are possibly formed from two characters,
where the first character can be...
asked 18 minutes ago -
A concentration cell is built based on the reaction:
2H+ + 2e- ----> H2
The pH...
asked 14 minutes ago -
what is the ph of the following solutions?
150 g NH4CI dissolved into 10.0 mL of...
asked 25 minutes ago -
A projectile is launched with an initial speed of 40 m/s at an
angle of 25°...
asked 8 minutes ago -
1. Using a function, display the customer who has the highest
credit limit. Display the customer...
asked 16 minutes ago -
A spatially uniform electric field varies in time according
to E = Eo + 3000 t,...
asked 42 minutes ago -
An electric power station that operates at 25 kV and uses a 20:1
step-up ideal transformer...
asked 35 minutes ago -
1. If 0.02% of a 0.6 M weak acid ionizes in a solution, what is
the...
asked 22 minutes ago -
The College of Business at Northeast College is accumulating
data as a first step in the...
asked 27 minutes ago -
A flint glass plate (n = 1.66) rests on the bottom of an
aquarium tank. The...
asked 36 minutes ago -
The position in an object as a function of time is given as ?
(?) =...
asked 51 minutes ago