A firm is considering the following independent projects. Project Investment Present value offuture cash flows NPV A $130 $176 $46 B $103 $115 $12 C $183 $287 $104 D $161 $199 $38 E $184 $273 $89 What is the Profitability Index of Project B? Question 5Answer a. 0.85 b. 1.12 c. 0.89 d. 1.18
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A firm is considering the following independent projects.
| Project | Investment | Present value of future cash flows |
|
| A | $130 | $176 | $46 |
| B | $103 | $115 | $12 |
| C | $183 | $287 | $104 |
| D | $161 | $199 | $38 |
| E | $184 | $273 | $89 |
What is the Profitability Index of Project B?
Question 5Answer
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- Refer to the table below to answer the following question. Project Initial Investment NPV IP 200 22 Q 180 26 IR 185 38 IS 380 10 The project with highest Profitability Index is Project P Project Q Project R Project SRefer to the table below to answer the following question. Project Initial Investment NPV P 200 22 Q 180 26 R 185 38 S 380 10 The project with highest Profitability Index is Project P Project Q Project R Project SWhich project should you invest in according to the NPV and IRR? Project A NPV@ 10% WACC = $135 and IRR 22% Project B NPV @ 10% WACC = $17 and IRR 21% Project C NPV @ 10% WACC = $146 and IRR 23% O a Project A O b. Cannot determine Oc. Project C O d. Project B O e. Project A or B
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- Question 1: Salalalh Methanol company management is considering three competing investment Projects A, B & C Year Initial Investment 1 2 Project A Project B 12000 4150 Project C 12000 12000 5225 8250 1200 3100 3800 4600 Assume a discount Rate of 5.45 % 5260 7360 9460 9275 9300 4 Use the information above and help the management in choosing the most desirable Project using Payback period, Discounted payback Net Present value and Profitability Index. Out of the four methods which is considered to be the most desirable. Explain10. Consider the following two projects with cash flows in $: Year 0 Year 1 Discount Year 2 Project Cash Flow Cash Flow Cash Flow Cash Flow Cash Flow Year 3 Year 4 Rate A -100 40 50 60 N/A 15% -73 30 30 30 30 15% Assume that projects A and B are mutually exclusive. The correct investment decision and the best rationale for that decision is to: A) invest in project A since NPV B IRR A. C) invest in project B since NPV B > NPV A. D) invest in project A since NPV A> 0.A firm has two potential investment projects. The project information is summarised in the table below. Project A $670 Project B $700 Expected value of profit Standard deviation of profit Coefficient of variation of profit 175 370 0.26 0.53 Which project has a lower absolute risk level? Which project has a lower relative risk level? Which project would you advise the firm to choose? Explain your answers. ---- --- ---- ..- ---
