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PI Question 6. [9 Marks] Telephy is evaluating the following five projects Project Investment 6 000 12 4000 1 05 10 00...
(3 marks) QUESTION 6 (6 marks) Consider the following two mutually exclusive projects: Year Cash Flow...
(3 marks) QUESTION 6 (6 marks) Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) $20,000 10, 000 10, 000 10, 000 10, 000 - $315, 000 25, 000 250, 000 55, 000 400, 000 The required return is 15% for both projects. Required: a) Which project should be accepted based on the net present value (NPV) and profitability index (PI) capital budgeting techniques? (4 marks) b) Explain why mutually exclusive projects might give rise...
Question :1 (40%, 8% per sub question) A firm is evaluating two mutually exclusive projects that...
Question :1 (40%, 8% per sub question) A firm is evaluating two mutually exclusive projects that have unequal lives. The firm must evaluate the projects using the annualized net present value approach and recommend which project they should select. The firm's cost of capital has been determined to be 14 percent, and the projects have the following initial investments and cash flows: The NPVs of Projects R and S are The annualized NPV of Project R is The annualized NPV...
QUESTION 1 Star Industries is considering three alternative projects for the company's investment. The cash flows for three independent projects are as follows: Year 1 Project A ($50,000) $10,...
QUESTION 1 Star Industries is considering three alternative projects for the company's investment. The cash flows for three independent projects are as follows: Year 1 Project A ($50,000) $10,000 $15,000 $20,000 $25,000 $30,000 Project B ($100,000) $25,000 $25,000 $25,000 $25,000 $25,000 Project C ($450,000) $200,000 $200,000 $200,000 a) If the discount rate for all three projects is 9.5 percent, calculate the profitability index (PI) of these three projects. Which project will be accepted if the projects are mutually exclusive? b)...
Suppose you are the financial manager of a firm considering the following five projects. Project A...
Suppose you are the financial manager of a firm considering the following five projects. Project A Project B Project C Project D Project E Initial Investment -$10,000 -$15,000 -$14,000 -$6,000 -$1,500 Year 1 $5,000 $5,000 $6,000 $4,000 $1,000 Year 2 $4,000 $5,000 $4,000 $2,000 $250 Year 3 $2,000 $5,000 $3,500 $2,000 $100 Year 4 $1,000 $5,000 $2,500 $2,000 $100 Year 5 $5,000 $2,000 $100 Year 6 $2,000 $100 Calculate the Payback Period for each project. Calculate the NPV for each...
CH. 9 WORKSHEET NPV and Other Investment Criteria For Problems 1-4, use a 5% discount rate...
CH. 9 WORKSHEET NPV and Other Investment Criteria For Problems 1-4, use a 5% discount rate and the following cash flows for projects A and B.: A: (-$2000, $500, $600, $700, $800) B: (-$2000, $950, $850, $400, $300) 1. Calculate the payback period for projects A and B. 2. Calculate the internal rate of return for projects A and B. 3. If A and B are mutually exclusive and the required rate of return is 5%, which should be accepted?...
Newtown Corp. has to choose between two mutually exclusive projects. If it chooses project A, Newtown...
Newtown Corp. has to choose between two mutually exclusive projects. If it chooses project A, Newtown Corp. will have the opportunity to make a similar investment in three years. However, if it chooses project B, it will not have the opportunity to make a second investment. The following table lists the cash flows for these projects. If the firm uses the replacement chain (common life) approach, what will be the difference between the net present value (NPV) of project A...
Question 3 (10 marks) a) Six mutually exclusive projects A-F are being considered by a company....
Question 3 (10 marks) a) Six mutually exclusive projects A-F are being considered by a company. They have been ordered by first costs so that project A has the lowest first cost, and F the highest. The table below provides information on the IRR and incremental IRR of each investment. For example, the IRR of C is 11 % ; the incremental IRR going from A to C is 13 % and the incremental IRR from B to C is...
Question 1. Issues in Capital Budgeting (30 marks-45 minutes) a. "Both the NPV and the IRR...
Question 1. Issues in Capital Budgeting (30 marks-45 minutes) a. "Both the NPV and the IRR rules will always lead to the same decision being made irrespective of whether you are evaluating a capital investment project in isolation or two mutually exclusive projects." Critically discuss this statement. (5 marks) b. Your company is considering whether to invest in a new machine that costs R6m but will save the company R2.5m per year for the three years of its expected life....
Please help me solve 4-8 Use the following table to answer questions 1 – 6. The...
Please help me solve 4-8
Use the following table to answer questions 1 – 6. The wacc is 10% for all projects in this table. Year Project A -1,000 1,000 Project B -1,000 300 400 500 600 Project C -1,000 550 450 350 250 Project D -1,000 600 800 1. Compute the Net Present Value (NPV), Internal Rate of Return (IRR), Profitability Index (PI), and Payback Period (PB) for each project: Project A Project B Project C Project D WACC...
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...
(3 marks) QUESTION 6 (6 marks) Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) $20,000 10, 000 10, 000 10, 000 10, 000 - $315, 000 25, 000 250, 000 55, 000 400, 000 The required return is 15% for both projects. Required: a) Which project should be accepted based on the net present value (NPV) and profitability index (PI) capital budgeting techniques? (4 marks) b) Explain why mutually exclusive projects might give rise...
QUESTION 1 Star Industries is considering three alternative projects for the company's investment. The cash flows for three independent projects are as follows: Year 1 Project A ($50,000) $10,000 $15,000 $20,000 $25,000 $30,000 Project B ($100,000) $25,000 $25,000 $25,000 $25,000 $25,000 Project C ($450,000) $200,000 $200,000 $200,000 a) If the discount rate for all three projects is 9.5 percent, calculate the profitability index (PI) of these three projects. Which project will be accepted if the projects are mutually exclusive? b)...
CH. 9 WORKSHEET NPV and Other Investment Criteria For Problems 1-4, use a 5% discount rate and the following cash flows for projects A and B.: A: (-$2000, $500, $600, $700, $800) B: (-$2000, $950, $850, $400, $300) 1. Calculate the payback period for projects A and B. 2. Calculate the internal rate of return for projects A and B. 3. If A and B are mutually exclusive and the required rate of return is 5%, which should be accepted?...
Question 3 (10 marks) a) Six mutually exclusive projects A-F are being considered by a company. They have been ordered by first costs so that project A has the lowest first cost, and F the highest. The table below provides information on the IRR and incremental IRR of each investment. For example, the IRR of C is 11 % ; the incremental IRR going from A to C is 13 % and the incremental IRR from B to C is...
Question 1. Issues in Capital Budgeting (30 marks-45 minutes) a. "Both the NPV and the IRR rules will always lead to the same decision being made irrespective of whether you are evaluating a capital investment project in isolation or two mutually exclusive projects." Critically discuss this statement. (5 marks) b. Your company is considering whether to invest in a new machine that costs R6m but will save the company R2.5m per year for the three years of its expected life....
Please help me solve 4-8
Use the following table to answer questions 1 – 6. The wacc is 10% for all projects in this table. Year Project A -1,000 1,000 Project B -1,000 300 400 500 600 Project C -1,000 550 450 350 250 Project D -1,000 600 800 1. Compute the Net Present Value (NPV), Internal Rate of Return (IRR), Profitability Index (PI), and Payback Period (PB) for each project: Project A Project B Project C Project D WACC...
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...
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