A company is considering two short-term projects: Month A B 0 -$1,200 -$1800 1 $0...
A company is considering two short-term projects:
Month A B
0 -$1,200 -$1800
1 $0 $ 400
2 $200 $ 400
3 $300 $ 300
4 $400 $ 500
5 $500 $ 200
6 $600 $ 100
a. Based on the undiscounted payback period, which project is preferred?
b. Calculate the benefit-cost ratio for each alternative (use excel)
c. Based on the benefit-cost ratio analysis method, which project is preferred?
Homework Answers
according to payback period, the project in which investment is recovered sooner is selected.
accoridng to benefit-cost ratio analysis ratio, the project with higher benefit-cost ratio is selected.
However, in benefit-cost analysis ratio, if discount rate would have given and if discounted value of benefits and costs is taken, it gives more fair view regarding investment decision.
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A company is considering two short-term projects:
Month A B
0 -$1,200 -$1800
1 $0...
A company is considering two short-term projects: Month A B 0 -$1,200 -$1800 1 $0 $...
A company is considering two short-term projects: Month A B 0 -$1,200 -$1800 1 $0 $ 400 2 $200 $ 400 3 $300 $ 300 4 $400 $ 500 5 $500 $ 200 6 $600 $ 100 a. Based on the undiscounted payback period, which project is preferred? b. Calculate the benefit-cost ratio for each alternative (use excel) c. Based on the benefit-cost ratio analysis method, which project is preferred? (Show and explain your solution)
solve by hand A company is considering two short-term projects. Based on the undiscounted payback period,...
solve by hand
A company is considering two short-term projects. Based on the undiscounted payback period, which project is preferred? Month _A -$1,200 -$1800 $ 0 $ 400 $200 $ 400 $300 $ 300 $400 $ 500 $500 $ 200 $600 $ 100 O-Nmin
9-54 Three mutually exclusive alternatives are beine A considered: $500 $400 $300 200 100 Initial...
9-54 Three mutually exclusive alternatives are beine A considered: $500 $400 $300 200 100 Initial cost Benefit at end of the first 200 200 year Uniform benefit at end of 100 125 subsequent years Useful life, in years 4 At the end of its useful life, an alternative is not replaced. If the MARR is 10%, which alternative should be selected (a) Based on the payback period? (b) Based on benefit-cost ratio analysis?
9-54 Three mutually exclusive alternatives are beine...
Do not use Excel or tables 9-54 Three mutually exclusive alternatives are being considered: Initial cost...
Do not use Excel or tables
9-54 Three mutually exclusive alternatives are being considered: Initial cost Benefit at end of the first $500 $400 $300 200 200 200 100 4 year Uniform benefit at end of 100 125 subsequent years Useful life, in years At the end of its useful life, an alternative is not replaced. If the MARR is 10%, which alternative should be selected (a) Based on the payback period? (b) Based on benefit-cost ratio analysis?
Need cash flow diagram 04) Three mutually exclusive alternative are being considered Initial Cost Benefit at the end of the first Year Uniform Annual Benefits at end of subsequent years Useful Lif...
Need cash flow diagram
04) Three mutually exclusive alternative are being considered Initial Cost Benefit at the end of the first Year Uniform Annual Benefits at end of subsequent years Useful Life in years $500 $200 $100 $400 $200 $125 $300 $200 $100 At the end of its useful life, an alternative is not replaced. If MARR is 10%, which alternatives should be selected? a) Based on the payback period? b) Based on benefit-cost ratio analysis c) Benefit/Costs Analysis using...
Three mutually exclusive alternatives are being considered: Initial cost Benefit at end of the first $500...
Three mutually exclusive alternatives are being considered: Initial cost Benefit at end of the first $500 $400 $300 200 200 200 year Uniform benefit at end of 100 125 100 subsequent years Useful life, in years 4 At the end of its useful life, an alternative is not replaced. If the MARR is 10%, which alternative should be selected (a) Based on the payback period? (b) Based on benefit-cost ratio analysis?
( Payback period Calculations) You are considering three independent projects, project A, project B, and project...
( Payback period Calculations) You are considering three independent projects, project A, project B, and project C. Given the following cash flow information, calculate the payback period for each. if you require a 3-year payback before an investment can be accepted, which project(s) would be accepted? Project A Project B Project C Initial Outlay -$1,100 -$9,000 -$6,000 Inflow year 1 600 4,000 2,000 inflow year 2 300 3,000 2,000 inflow year 3 200 3,000 3,000 inflow year 4 100 3,000...
Quantitative Problem: Bellinger Industries is considering two projects for inclusion in its capital budget, and you...
Quantitative Problem: Bellinger Industries is considering two projects for inclusion in its capital budget, and you have been asked to do the analysis. Both projects' after-tax cash flows are shown on the time line below. Depreciation, salvage values, net operating working capital requirements, and tax effects are all included in these cash flows. Both projects have 4-year lives, and they have risk characteristics similar to the firm's average project. Bellinger's WACCC is 9 %. 0 1 2 4 Project A...
Quantitative Problem: Bellinger Industries is considering two projects for inclusion in its capital budget, and you...
Quantitative Problem: Bellinger Industries is considering two projects for inclusion in its capital budget, and you have been asked to do the analysis. Both projects' after-tax cash flows are shown on the timeline below. Depreciation, salvage values, net operating working capital requirements, and tax effects are all included in these cash flows. Both projects have 4-year lives, and they have risk characteristics similar to the firm's average project. Bellinger's WACC is 10%. Project A Project B -1,200 -1,200 600 410...
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...
solve by hand
A company is considering two short-term projects. Based on the undiscounted payback period, which project is preferred? Month _A -$1,200 -$1800 $ 0 $ 400 $200 $ 400 $300 $ 300 $400 $ 500 $500 $ 200 $600 $ 100 O-Nmin
9-54 Three mutually exclusive alternatives are beine A considered: $500 $400 $300 200 100 Initial cost Benefit at end of the first 200 200 year Uniform benefit at end of 100 125 subsequent years Useful life, in years 4 At the end of its useful life, an alternative is not replaced. If the MARR is 10%, which alternative should be selected (a) Based on the payback period? (b) Based on benefit-cost ratio analysis?
9-54 Three mutually exclusive alternatives are beine...
Do not use Excel or tables
9-54 Three mutually exclusive alternatives are being considered: Initial cost Benefit at end of the first $500 $400 $300 200 200 200 100 4 year Uniform benefit at end of 100 125 subsequent years Useful life, in years At the end of its useful life, an alternative is not replaced. If the MARR is 10%, which alternative should be selected (a) Based on the payback period? (b) Based on benefit-cost ratio analysis?
Need cash flow diagram
04) Three mutually exclusive alternative are being considered Initial Cost Benefit at the end of the first Year Uniform Annual Benefits at end of subsequent years Useful Life in years $500 $200 $100 $400 $200 $125 $300 $200 $100 At the end of its useful life, an alternative is not replaced. If MARR is 10%, which alternatives should be selected? a) Based on the payback period? b) Based on benefit-cost ratio analysis c) Benefit/Costs Analysis using...
Three mutually exclusive alternatives are being considered: Initial cost Benefit at end of the first $500 $400 $300 200 200 200 year Uniform benefit at end of 100 125 100 subsequent years Useful life, in years 4 At the end of its useful life, an alternative is not replaced. If the MARR is 10%, which alternative should be selected (a) Based on the payback period? (b) Based on benefit-cost ratio analysis?
Quantitative Problem: Bellinger Industries is considering two projects for inclusion in its capital budget, and you have been asked to do the analysis. Both projects' after-tax cash flows are shown on the time line below. Depreciation, salvage values, net operating working capital requirements, and tax effects are all included in these cash flows. Both projects have 4-year lives, and they have risk characteristics similar to the firm's average project. Bellinger's WACCC is 9 %. 0 1 2 4 Project A...
Quantitative Problem: Bellinger Industries is considering two projects for inclusion in its capital budget, and you have been asked to do the analysis. Both projects' after-tax cash flows are shown on the timeline below. Depreciation, salvage values, net operating working capital requirements, and tax effects are all included in these cash flows. Both projects have 4-year lives, and they have risk characteristics similar to the firm's average project. Bellinger's WACC is 10%. Project A Project B -1,200 -1,200 600 410...
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...
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