Profitability index of X = 1.0857
Profitability index of Y = 1.1839
If the projects are independent then both the projects must be accepted as the profitability index of both the projects is greater than 1.
If the projects are mutually exclusive then the project Y must be accepted because it has a greater profitability index.
Problem 10.43 You are analyzing two proposed capital investments with the following cash flows: Year Project...
Blossom Industries management is planning to replace some existing machinery in its plant. The cost of the new equipment and the resulting cash flows are shown in the accompanying table. The firm uses an 18 percent discount rate for projects like this. Should management go ahead with the project? Year Cash Flow 0 -$3,029,000 1 836,610 2 874,500 3 1,100,000 4 1,373,260 5 1,589,400 What is the NPV of this project? (Enter negative amounts using negative signeg.-45.25. Do not round...
You are considering the following two projects and can only take one. Your cost of capital is 11.4 %. The cash flows for the two projects are as follows ($ million): Project Year 0 Year 1 Year 2 Year 3 Year 4 A −$102 $27 $31 $39 $49 B −$102 $49 $39 $31 $20 a. What is the IRR of each project? b. What is the NPV of each project at your cost of capital? c. At what cost of...
The following are the cash flows of two projects: Year Project A Project B 0 −$260 −$260 1 140 160 2 140 160 3 140 160 4 140 a. If the opportunity cost of capital is 11%, calculate NPV for both projects? (Do not round intermediate calculations. Round your answers to 2 decimal places.) Project NPV A $ B b. Which of these projects is worth pursuing if you...
Problem 10.36 Management of Crane Automotive, a manufacturer of auto parts, is considering investing in two projects. The company typically compares project returns to a cost of funds of 17.00 percent. Year 0 Project 1 - $500,719 325,000 99,000 130,500 154,000 Project 2 - $563,701 128,750 174,170 245,700 287,050 Compute the IRRs based on the cash flows. Which project(s) will be accepted? (Round final answer to 2 decimal places, e.g. 15.25%.) The IRR of project 1 is % and the...
Vaughn Company is considering two different, mutually exclusive capital expenditure proposals. Project A will cost $506,000, has an expected useful life of 12 years, a salvage value of zero, and is expected to increase net annual cash flows by $69,900. Project B will cost $314,000, has an expected useful life of 12 years, a salvage value of zero, and is expected to increase net annual cash flows by $45,200. A discount rate of 7% is appropriate for both projects. Click...
Question 3 McKnight Company is considering two different, mutually exclusive capital expenditure proposals. Project A will cost $542,000, has an expected useful life of 12 years, a salvage value of zero, and is expected to increase net annual cash flows by $74,500. Project B will cost $338,000, has an expected useful life of 12 years, a salvage value of zero, and is expected to increase net annual cash flows by $48,000. A discount rate of 7% is appropriate for both...
Brief Exercise 26-5 McKnight Company is considering two different, mutually exclusive capital expenditure proposals. Project A will cost $450,241, has an expected useful life of 11 years, a salvage value of zero, and is expected to increase net annual cash flows by $73,500. Project B will cost $298,321, has an expected useful life of 11 years, a salvage value of zero, and is expected to increase net annual cash flows by $50,200. A discount rate of 9% is appropriate for...
1. You have the chance to participate in a project that produces the following cash flows: Cash Flows ($) C0 C1 C2 4,600 4,400 –10,800 a. The internal rate of return is 12.69%. If the opportunity cost of capital is 12%, what is the NPV of the project? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places.) NPV $ __________. 2. Consider the following projects: Cash Flows...
IL.Cupi D . Provide an evaluation of two proposed projects, both with 5-year expected identical initial outlays of $110,000. Both of these projects involve additions donia's highly successful Avalon product line, and as a result, the require return on both projects has been established at 12 percent. The expected fre flows from each project are as follows: ected lives and additions to Cale- required rate of xpected free cash Initial outlay Inflow year 1 Inflow year 2 Inflow year 3...
McKnight Company is considering two different, mutually
exclusive capital expenditure proposals. Project A will cost
$509,000, has an expected useful life of 12 years, a salvage value
of zero, and is expected to increase net annual cash flows by
$74,100. Project B will cost $342,000, has an expected useful life
of 12 years, a salvage value of zero, and is expected to increase
net annual cash flows by $50,700. A discount rate of 8% is
appropriate for both projects.
Compute...