Bruin, Incorporated, has identified the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 -$ 36,200 1 6,300 12,800 -$36,200 18,700 14,200 11,700 8,700 a. What is the IRR for Project A? 2 3 4 IRR 19,300 23,300 b. What is the IRR for Project B? IRR
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- The IRR of the project is _____ %?5. IRR (S5.3) Write down the equation defining a project's internal rate of return (IRR). In practice, how is IRR calculated?Using image: a-1. What is the payback period for each project a-2. If you apply the payback criterion, which investment will you choose? b-1. What is the discounted payback period for each project? b-2. If you apply the discounted payback criterion, which investment will you choose? c-1. What is the NPV for each project? c-2. If you apply the NPV criterion, which investment will you choose? d-1. What is the IRR for each project? d-2. If you apply the IRR criterion, which investment will you choose? e-1. What is the profitability index for each project? e-2. If you apply the profitability index criterion, which investment will you choose? f. Based on your answers in (a) through (e), which project will you finally choose?
- What is the expected NPV of the following decision tree? The net flow and associated probability is shown above and below each branch for the two-year project. a. -R18.72m b. -R5.56m c. R5.00m d. R16.12m1. What is the project’s net present value? 2. What is the project’s internal rate of return to the nearest whole percent? 3. What is the project’s simple rate of return?Wallace Company is considering two projects. Their required rate of return is 10%. Which of the two projects, A or B, is better in terms of internal rate of return?
- Which of the following statements is correct? A. If the NPV of a project is greater than 0, its PI will equal 0. B. If the IRR of a project is 0%, its NPV, using a discount rate, k, greater than 0, will be 0. C. If the PI of a project is less than 1, its NPV should be less than 0. D. NoneAnswer this question as it is pertaining to two MUTUALLY EXCLUSIVE projects on the following figure. Given r=6%, which project would you choose if you decide to use the internal rate of return (IRR) as the criterion? Group of answer choices Project A Project B Neither EitherConsider two project alternatives, project I and project II, with their payoffs and their associated probabilities outlined in the following table: Project I Project II Payoff 10 15 20 Probability 0.1 0.8 0.1 Payoff 1. Compute RRI for each project; 2. Would you select project I or project II? Why. 5 10 14 Probability 0.2 0.3 0.5
- Your employer is trying to select from a list of possible capital projects. The projects, along with their cost and benefits, are listed below. The capital budget available is $1 million. In addition to spending constraints, your employer would like to select at least 2 projects. Projects 1 and 5 cannot both be selected together. Formulate the problem as a linear program and determine the optimal solution. Project Cost Net Present Value 1 $205,000 $285,000 $280,000 $260,000 $235,000 $600,000 $620,000 $540,000 $790,000 $400,000 4 Which projects should be selected? Project 1 will Project 2 will Project 3 will Project 4 will Project 5 will < Prev 5 of 5 NextDwight Donovan, the president of Campbell Enterprises, is considering two investment opportunities. Because of limited resources, he will be able to invest in only one of them. Project A is to purchase a machine that will enable factory automation; the machine is expected to have a useful life of four years and no salvage value. Project B supports a training program that will improve the skills of employees operating the current equipment. Initial cash expenditures for Project A are $102,000 and for Project B are $47,000. The annual expected cash inflows are $32,178 for Project A and $15,474 for Project B. Both investments are expected to provide cash flow benefits for the next four years. Campbell Enterprises' desired rate of return is 6 percent. (PV of $1 and PVA of $1) (Use appropriate factor(s) from the tables provided.) Required a. Compute the net present value of each project. Which project should be adopted based on the net present value approach? b. Compute the approximate…(question3 c,d) c) Calculate the profitability index (PI) for each project d) Calculate the internal rate of return (IRR) for each project.