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There are two projects under consideration by the Rainbow factory. Each of the projects will require an initial investment of $35,000 and is expected to generate the following cash flows:
Use the information from the previous exercise to calculate the
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- There are two projects under consideration by the Rainbow factory. Each of the projects will require an initial investment of $34,665 and is expected to generate the following cash flows: First Year Second Year Third Year Total Alpha Project $31,500 $22,000 $4,500 $58,000 Beta Project 7,500 23,500 29,066 60,066 A. Calculate the internal rate of return on both projects. Use the IRR spreadsheet function to calculate internal rate of return. Alpha Project fill in the blank % Beta Project fill in the blank %arrow_forwardThere are two projects under consideration by the Rainbow factory. Each of the projects will require an initial investment of $35,192 and is expected to generate the following cash flows: First Year Second Year Third Year Total Alpha Project $32,000 $22,000 $5,000 $59,000 Beta Project 7,000 23,000 29,047 59,047 A. Calculate the internal rate of return on both projects. Use the IRR spreadsheet function to calculate internal rate of return. Alpha Project % Beta Project % B. Make a recommendation on which one to accept.arrow_forwardThere are two projects under consideration by the Rainbow factory. Each of the projects will require an initial investment of $35,506 and is expected to generate the following cash flows: First Year Second Year Third Year Total Alpha Project $32,000 $23,000 $5,500 $60,500 Beta Project 7,000 24,000 30,960 61,960 A. Calculate the internal rate of return on both projects. Use the IRR spreadsheet function to calculate internal rate of return. Alpha Project fill in the blank 1% Beta Project fill in the blank 2% B. Make a recommendation on which one to accept. Alpha .arrow_forward
- A company is considering three alternative Investment projects with different net cash flows. The present value of net cash flows is calculated using Excel and the results follow. Potential Projects Present value of net cash flows (excluding initial investment) Initial investment Complete this question by entering your answers in the tabs below. a. Compute the net present value of each project. b. If the company accepts all positive net present value projects, which of these will It accept? c. If the company can choose only one project, which will it choose on the basis of net present value? Required A Required B Compute the net present value of each project. Potential Projects Project A Present value of net cash flows Initial investment Net present value Required C Project E Project C $10,685 (10,000)arrow_forwardThere are two projects under consideration by the Rainbow factory. Each of the projects will require an initial Investment of $34,474 and is expected to generate the following cash flows: First Year Second Year Third Year Total Alpha Project $23,000 $4,500 $59,000 Beta Project 23,500 25,457 56,957 A. Calculate the Internal rate of return on both projects. Use the IRR spreadsheet function to calculate Internal rate of return. $31,500 8,000 Alpha Project Beta Project B. Make a recommendation on which one to accept. Alpha •✓. %arrow_forwardConsider the following project-balance profiles for proposed investment projects, where the project-balance figures are rounded to the nearest dollar: (a) Compute the net present worth of each investment.(b) Determine the project balance at the end of period 2 for Project C ifA2 = $500.(c) Determine the cash flows for each project.(d) Identify the net future worth of each project.arrow_forward
- Jay is currently evaluating a project with the following estimated investment requirements ($ millions) by year (starting in year 0): investment year investment 0 11.2 1 16.6 2 15.8 3 11.3 4 18 The estimated revenues ($ millions) from the project, expected to begin at time 3, are given in the table below: \ investment year reveune 0 13.3 1 14 2 8.4 3 14.7 4 9.9 5 8.4 6 13.4 To account for the different risk characteristics throughout the project's life, Jay has determined that a hurdle rate of 24% should be used beginning at time 0, while 30% should be used beginning in period 5. Determine the NPV for the project. NPV =arrow_forwardPerform financial analysis for a project using the format provided in Figure 4-5 in your textbook (attached business_case_financials template). Assume that the project costs and benefits for this project are spread over four years as follows: Estimated costs are $200,000 in Year 1 and $30,000 each year in Years 2, 3, and 4. Estimated benefits are $0 in Year 1 and $100,000 each year in Years 2, 3, and 4. Use a 9 percent discount rate, and round the discount factors to two decimal places. Using the attached business case financials template, calculate and clearly display the NPV, ROI, and year in which payback occurs. In addition, write a paragraph explaining whether you would recommend investing in this project, based on your financial analysis. Business case financial spreadsheet and paragraph explaining your recommendations for investing or not in the project.arrow_forwardYokam Company is considering two alternative projects. Project 1 requires an initial investment of $400,000 and has a present value of cash flows of $1,100,000. Project 2 requires an initial investment of $4,000,000 and has a present value of cash flows of $6,000,000. 1. Compute the profitability index for each project. 2. Based on the profitability index, which project should the company prefer? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Compute the profitability index for each project. Project 1 Project 2 Choose Numerator: Profitability Index T 7 Choose Denominator: 4 of 5 180 # Next > G Oarrow_forward
- There are two projects under consideration by the Rainbow factory. Each of the projects will require an initial investment or $28.000 and is expected to generate the following cash flows: If the discount rate is 5% compute the NPV of each project and make a recommendation of the project to be chosen.arrow_forwardThere are two projects under consideration by the Rainbow factory. Each of the projects will require an initial investment of $35,000 and is expected to generate the following cash flows: If the discount rate is 12%, compute the NPV of each project.arrow_forwardJoliet Company is considering two alternative investments. The company requires an 18% return from its investments. Compute the IRR for both Projects and recommend one of them. For further instructions on internal rate of return in Excel, see Appendix C.arrow_forward
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