Question

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 1 9.0 10 16 2 5.5 25 30 3 3.5 18 18 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.) Profitability index L6 2.56 2.56 Correct G5 3.61 3.61 Correct Wi-Fi 2.94 2.94 Correct b. Calculate the NPV for each investment. (Enter your answers in dollars, not millions of dollars. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 1,234,567.89.) NPV L6 $ 8118707.74 8118707.74 Incorrect G5 $ 37207362.89 37207362.89 Incorrect Wi-Fi $ 34862509.39 34862509.39 Correct

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 1 LG 26.0 9.0 5.5 3.5 G5 -$12 10 25 18 Wi-Fi -$18 16 30 18 WN 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.) Profitability index 2.56 3.61 2.94 Wi-Fi b. Calculate the NPV for each investment. (Enter your answers in dollars, not millions of dollars. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 1,234,567.89.) L6 NPV $ 8118707.74 $ 37207362.89 $ 34862509.39 G5 Wi-Fi 0 1 2 3 L6 G5 WiFi 0.1 (4,000,000.00) (17,000,000.00) (18,000,000.00) 1 8,000,000.00 15,000,000.00 16,000,000.00 0.9090909 4,500,000.00 30,000,000.00 30,000,000.00 0.8264463 1,500,000.00 21,000,000.00 18,000,000.00 0.7513148 NPV (4,000,000.00) 7,272,727.27 3,719,008.26 1,126,972.20 $ 8,118,707.74 4,000,000.00 3.029676935 (17,000,000.00) (18,000,000.00) 13,636,363.64 14,545,454.55 24,793,388.43 24,793,388.43 15,777,610.8213,523,666.42 $ 37,207,362.89 $ 34,862,509.39 17,000,000.00 18,000,000.00 3.188668405 2.936806077

Answer 1

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

I THINK YOU JUST MADE A MISTAKE IN WRITING OUTFLOW AT YEAR 0 FOR L6 AND G5, OTHERWISE EVERYTHING IS DONE CORRECTLY

108 projects (Autosaved) (Autosaved) (Autosaved) - Microsoft Excel (Product Activation Failed) File Home Insert Page Layout Formulas Data Review View Add-Ins - 2x % Cut Σ AutoSum : A Calibri 11 AA = = = pt Wrap Text General Ea Copy Fill Z Paste BI U D- DA Format Painter Merge & Center - $ % , Conditional Format :.: Cell Insert Delete Format Sort & Find & Formatting as Table Styles 2 Clear Filter Select Clipboard Font Alignment Number Styles Cells Editing MX122 foc _ MO MPMQ MR MS MTMU MV MW MX MY MZ NA 107 PV FACTOR FOR A FORB FOR C year LG G5 WIFI AT 10% PV OF CFAT PV OF CFAT PV OF CFAT 109 A B A*D B*D C D 110 -6000000 -12000000 -18000000 1.000000 -6000000.00 - 12000000.00 -18000000.00 111 9000000 10000000 16000000 0.909091 8181818.18 9090909.09 14545454.55 112 2 5500000 25000000 30000000 0.826446 4545454.55 20661157.02 24793388.43 113 3500000 18000000 18000000 0.751315 2629601.80 13523666.42 13523666.42 114 115 NET PRESENT VALUE = 9356874.53 31275732.53 34862509.39 116 117 118 PROFITABILITY INDEX = 1 +(NPV/INVESTMENT) 119 FOR L6 1 + (9356874.53/6000000 = 2.56 120 FOR G5 1 + (31275732.53/12000000) = 3.61 121 FOR WIFI 1 + (34862509.39/18000000) = 2.94 122 123 NPV 124 FOR L6 9356874.53 125 FOR G5 31275732.53 126 FOR WIFI 34862509.39 127 I RRnpvbeta RATION PBP ARR invest, EAA MI-np-ir_ REPLACEMENT S HPR GMAM EAC MACRS NPV RELEVANT BETA LEVERED REPLACEMENT BOND OPTION TO WAITSTEIN III Rea ferences: KQ79 BOU 120% -_- ... * * *O ENG 30-11-2019