Consider the following two mutually exclusive projects: Cash Flow (B) Cash Flow (A) $-300,000 20,000 50,000 50,000 390,000 Year $-40,000 19,000 12,000 18,000 4 10,500 Whichever project you choose, if any, you require 15 percent return on your investment. a) If you apply the payback criterion, which investment will you choose? Why? b) If you apply the NPV criterion, which investment will you choose? Why? c) If you apply the IRR criterion, which investment will you choose? Why? d) If you apply the profitability index, which investment will you choose? Why?
Q: Consider the following cash flows for two mutually exclusive capital investment projects. The…
A: Mutually exclusive projects are a set of projects out of which only one project can be accepted.
Q: Kenny, Inc. has identified the following two mutually exclusive projects. Project A -$25,000 20,000…
A: Capital budgeting indicates the evaluation of the profitability of possible investments and projects…
Q: A project will generate the following cash flows. If the required rate of return is 15%, what is the…
A: To open the "NPV function" window - MS-Excel --> Formulas --> Financials --> NPV.
Q: Use the following information for problems 1 to 5. Assume that the projects are mutually exclusive.…
A: Since you have posted a question with multiple sub-parts, we will solve first three subparts for…
Q: You have been asked to analyze two investment proposals, A and B. Project A’s cost is RM80,000 and…
A: Since more than three sub-parts are asked at a time. The answer for first three sub-parts is…
Q: Consider the following cash flows: Year 0 1 2 3 4 5 6 Cash Flow -$9,000 $2,000…
A: NPV: It stands for Net Present value. It is the difference between PV (Present value) of cash…
Q: Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow…
A: Formulas:
Q: Imagine you are investing $100,000 into a project A. MARR is 15% This investment will bring you the…
A: Investment in Project $100000 Annual Positive Cashflwos = $ 31000 from year 1 to year MARR = 15%
Q: Wang Food Market, Inc. has given you the following information on the two mutually exclusive…
A: Profitability Index =PV of cash in flows / Initial Investment Payback Period = (Initial Investment /…
Q: Two mutually exclusive investment projects have the following forecasted cash flows: Year A B…
A: IRR is the internal rate of return a project generates in its lifetime expressed in annual terms. It…
Q: Consider the following two mutually exclusive projects: Cash Flow (A) $-300,000 20,000 50,000 50,000…
A: Formulas: Payback period = Last period with negative cashflows + Last negative cumulative cash…
Q: A project will generate the following cash flows. The required rate of return is 15%. If the…
A: Profitability index: Profitability is computed by dividing the present value of cash inflow to…
Q: Management is evaluating two mutually exclusive projects, Thing 1 and thing 2, with the following…
A: Hello. Since your question has multiple sub-parts, we will solve the first three sub-parts for you.…
Q: E Click the icon to view the cash flows for the projects. More Info a) Compute the IRR for each…
A: Net present value (NPV) and internal rate of return (IRR) are the capital budgeting techniques used…
Q: The Whenworth Corporation is trying to choose between the following two mutually exclusive design…
A: Introduction Net Present Value(NPV): Net present value is a tool of Capital budgeting to analyze…
Q: You are considering a project that has the following cash flow and WACC data. What is the project's…
A: Capital budgeting methods are the quantitative approaches that the top level management of the…
Q: 22
A: The calculation of net present value for project B is shown in the below table:
Q: A company is considering mutually exclusive projects. The free cash flows associated with these…
A: The capital budgeting is a tool or technique that helps to evaluate the profitability of the project…
Q: Assume two mutually exclusive projects have the estimated net incremental after-tax cash flows shown…
A: NPV is the net current worth of cash flows that have occurred in the past or present. It is computed…
Q: The required rate of return on these projects is 11%. They are of equal risk. What is each…
A: “Since you have posted a question with multiple sub-parts, we will solve first three subparts for…
Q: Consider the following two investment alternatives: The firm's MARR is known to be 15%.(a) Compute…
A: IRR is a tool for making investment decisions. It measures whether an investment is profitable or…
Q: Consider the two mutually exclusive investment projects given in the table below for which MARR =…
A: The internal rate of return (IRR) is the rate of return that equates the present value of future…
Q: You are asked to evaluate two projects X and Y. The cash flow for each is listed below. The…
A: Net present value (NPV) is the difference between the present value of cash inflows and cash…
Q: What is the project's payback
A: The payback period is the time duration taken to reap back the amount invested in the project. The…
Q: Consider the two mutually exclusive investment projects given in the table below for which MARR =…
A: Project A's initial cost is less than Project B's initial cost. As a result, consider A to be the…
Q: Consider the following cash flows for two mutually exclusive capital investment projects. The…
A: PROJECT B Year Cash flows 0 -20000 1 6000 2 6000 3 6000 4 5400 5 5400 6 5400
Q: You must analyze two projects, X and Y. Each project costs $10,000 and the firm's WACC is 14%. The…
A: Hi! Thank you for the question, As per the honor code, we are allowed to answer three sub-parts at a…
Q: A project has cash flows of -$152,000, $60,800, $62,300, and $75,000 for Years 0 to 3, respectively.…
A: Year Cash flow 0 -152000 1 60800 2 62300 3 75000 Required rate of return = 13%
Q: 1. The Bolster Company is considering two mutually exclusive projects: Year Cash Flow A Cash Flow B…
A: given, year A B 0 -100000 -100000 1 31250 0 2 31250 0 3 31250 0 4 31250 0 5 31250…
Q: Consider two investments with the following sequences of cash flows: (a) Compute the IRR for each…
A: a) Working note:
Q: You are considering the following two mutually exclusive projects. Using the replacement chain…
A: For Project-A; Cost of capital is 10% To Find: NPV of the project
Q: Consider the two mutually exclusive investment projects A and B: Cash Flows Year 0 Year 1 Year 2…
A: Capital budgeting is a way to measure the profitability of the new investment or project before…
Q: Your firm has estimated the following cash flows for two mutually exclusive capital investment…
A: Using the IRR and NPV functions in excel
Q: Consider the following two mutually exclusive alternatives: (a) Determine the IRR on the incremental…
A: IRR is a parameter which is used in financial analysis to measure the feasibility of potential…
Q: Assume two mutually exclusive projects have the estimated net incremental after-tax cash flows shown…
A: Capital budgeting is the process that a business uses to determine which proposed fixed asset…
Q: Suppose your firm is considering two mutually exclusive, required projects with the cash flows shown…
A: Given: Year Project A Project B 0 -$36,000 -$46,000 1 $26,000 $26,000 2 $46,000 $36,000 3…
Q: Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0…
A: Since you have posted a question with multiple sub-parts, we will solve the first three subparts for…
Q: You have a choice between these 2 mutually exclusive investments, Projects A and B. If you require a…
A: The decision can be taken on the basis of NPV NPV can be calculated using following function in…
Q: Consider the following cash flows: Year Cash Flow 0 -$8,000 1…
A: Required return = 10% 1. NPV Calculation of NPV Year Cash flow PVF(10%,Year) Present value A…
Q: BAG Corporation is considering the following two projects; namely Project X and Project Y: Project Y…
A: YEAR PROJECT X PROJECT X PROJECT X PROJECT Y PROJECT Y PROJECT Y CASH FLOW ACC. CASH FLOW CAL.…
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 2 images
- Start with the partial model in the file Ch10 P23 Build a Model.xlsx on the textbooks Web site. Gardial Fisheries is considering two mutually exclusive investments. The projects expected net cash flows are as follows: a. If each projects cost of capital is 12%, which project should be selected? If the cost of capital is 18%, what project is the proper choice? b. Construct NPV profiles for Projects A and B. c. What is each projects IRR? d. What is the crossover rate, and what is its significance? e. What is each projects MIRR at a cost of capital of 12%? At r = 18%? (Hint: Consider Period 7 as the end of Project Bs life.) f. What is the regular payback period for these two projects? g. At a cost of capital of 12%, what is the discounted payback period for these two projects? h. What is the profitability index for each project if the cost of capital is 12%?Consider the following two mutually exclusive projects: Cash Flow (A) $-300,000 20,000 50,000 50,000 Cash Flow (B) $-40,000 19,000 12,000 18,000 10,500 Year 2 3 4 390,000 Whichever project you choose, if any, you require 15 percent return on your investment. a) If you apply the payback criterion, which investment will you choose? Why? b) If you apply the NPV criterion, which investment will you choose? Why? c) If you apply the IRR criterion, which investment will you choose? Why? d) If you apply the profitability index, which investment will you choose? Why?Consider the following two mutually exclusive projects:Year Cash Flow (X) Cash Flow (Y)0 -$365,000 -$38,0001 25,000 16,0002 65,000 12,0003 65,000 17,0004 425,000 15,000Whichever project you choose, if any, you require a 13 percent return on your investment. i. Which investment will you choose if you use the payback decision criteria? Justify your answer.ii. Which investment will you choose if you use the NPV decision criteria? Justify your answer.iii. Which project will you choose ultimately based on your answers above?
- Consider the following two mutually exclusive projects: YEAR CASH FLOW (A) CASH FLOW (B)0 -$300,000 -$39,0001 20,000 18,0002 70,000 12,0003 80,000 18,0004 400,000 19,000 Whichever project you choose, if any, you require a 15 percent return on your investment.i) If you apply the payback period (PBP) criterion, which investment will you choose? Why?ii) If you apply the net present value (NPV) criterion, which investment will you choose? Why?iii) If you apply the profitability index (PI) criterion, which investment will you choose? Why?iv) If you apply the internal rate of return (IRR) criterion, which investment will you choose?Why?v) Based on your answers in (i) through (iv), which project will you finally…Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 -$ 54,000 -$ 23,000 1 12,700 11,600 2 23,200 11,200 3 27,600 4 46,500 12,500 6,000 Whichever project you choose, if any, you require a rate of return of 14 percent on your Investment. If you apply the payback criterion, you will choose Project NPV criterion, you will choose Project If you apply the IRR criterion, you will choose Project If you choose the profitability Index criterion, you will choose Project Based on your first four answers, which project will you finally choose? If you apply theConsider two mutually exclusive projects with the following expected cash flows : Cash Flows Year Project C Project D 0 -15,000 -21,000 1 6,000 6,000 2 12,000 16,000 3 8,000 14,000 Whichever project you choose, if any, you require a return of 12% on your investment. a. If you apply the discounted payback criterion, which project will you choose? Why? b. If you apply the NPV criterion, which project will you choose? Why? c. Based on your answers in (a) and (b), which project will you finally choose? Why ? (i.e clearly explain the strengths and the weaknesses of each method therefore the reason(s) for choosing the project based on the chosen method)
- 17: Consider the following 2 mutually exclusive projects: Year Cash flow A Cash Flow B 0 -291000 -41600 1 37000 20000 2 55000 17600 3 55000 17200 4 366000 14000 Whichever project you choose, if any, you require a return of 11% on your investment. If you apply the payback criterion, which investment will you choose? Why? If you apply the discounted payback criterion, which investment will you choose? Why? If you apply the NPV criterion, which investment will you choose? Why? If you apply the IRR criterion, which investment will you choose? Why? If you apply the profitability index criterion, which investment will you choose? Why? Based on your answers in parts A through E, which project will you finally choose? Why?Consider two mutually exclusive projects with the following expected cash flows and a required rate of return of 12% Cash Flows Year Project A Project B 0 -75,000 -100,000 1 60,000 60,000 2 30,000 50,000 3 30,000 60,000 (a) If you apply the discounted payback criterion, which investment will you choose? Why? (b) If you apply the NPV criterion, which investment will you choose? Why? (c) Based on your answers in (a) and (b), which project will you finally choose? Why ? (i.e clearly explain the strengths and the weaknesses of each method therefore the reason(s) for choosing the project based on the chosen method)Q4: Consider the following two mutually exclusive projects, you require a 15 percent return on your investment: Year Cash Flow (A) Cash Flow (B) -18,000 10,000 -170,000 10,000 25,000 25,000 380,000 1 6,000 10,000 3 4 8,000 a) If you apply the payback criterion, which investment will you choose? Why? b) If you apply the discounted payback criterion, which investment will you choose? Why? c) If you apply the NPV criterion, which investment will you choose? Why? d) If you apply the IRR criterion, which investment will you choose? Why? e) If you apply the profitability index criterion, which investment will you choose? Why? f) Based on your answers in (a) through (e), which project will you finally choose? Why? g) What is the relationship between IRR and NPV? Are there any situations in which you might prefer one method over the other? Explain
- Consider the following two projects: Cash flows Project A Project B C0�0 −$ 240 −$ 240 C1�1 100 123 C2�2 100 123 C3�3 100 123 C4�4 100 a. If the opportunity cost of capital is 8%, which of these two projects would you accept (A, B, or both)? b. Suppose that you can choose only one of these two projects. Which would you choose? The discount rate is still 8%. c. Which one would you choose if the cost of capital is 16%? d. What is the payback period of each project? e. Is the project with the shortest payback period also the one with the highest NPV? f. What are the internal rates of return on the two projects? g. Does the IRR rule in this case give the same answer as NPV? h. If the opportunity cost of capital is 8%, what is the profitability index for each project? i. Is the project with the highest profitability index also the one with the highest NPV? j. Which measure should you use to choose between the projects?Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) -$ 15,456 5,225 8,223 13,013 8,705 0 1 234 -$ 276,363 26,400 51,000 57,000 402,000 Whichever project you choose, if any, you require a 6 percent return on your investment. a. What is the payback period for Project A? Payback period b. What is the payback period for Project B? Payback period c. What is the discounted payback period for Project A? Discounted payback periodQ4: Consider the following two mutually exclusive projects, you require a 15 percent return on your investment: Year Cash Flow (A) -170,000 10,000 25,000 Cash Flow (B) -18,000 10,000 6,000 10,000 8,000 1 3 25,000 4 380,000 a) If you apply the payback criterion, which investment will you choose? Why? b) If you apply the discounted payback criterion, which investment will you choose? Why? c) If you apply the NPV criterion, which investment will you choose? Why? d) If you apply the IRR criterion, which investment will you choose? Why? e) If you apply the profitability index criterion, which investment will you choose? Why? f) Based on your answers in (a) through (e), which project will you finally choose? Why? 8) What is the relationship between IRR and NPV? Are there any situations in which you might prefer one method over the other? Explain