Calculate the NPV of each project. (Use the NPV function in Excel to solve this problem.)Which of the two projects would you fund if the decision is based only on financial information and you could only choose one of theprojects?OmegaAlphaYearInflowYO0Y10Outflow207,000110,000NetflowYearInflowOutflowNetflow(207,000)YO0217,000(217,000)(110,000)Y17,000190,000(183,000)Y2150,0000150,000Y2150,0000150,000Y3220,00030,000190,000Y3220,00030,000190,000Y4161,0000161,000Y4191,0000191,000Y5205,00048,000157,000Y5205,00038,000167,000Y6197,0000197,000Y6197,0000197,000Y7100,00030,00070,000Y7100,00030,00070,000Total 1,033,000425,000608,000Total1,070,000505,000565,000The NPV for Omega isThe NPV for Alpha isThe better project is

NPV Calculations and Project RecommendationNPV for Omega Project:We can't calculate the NPV for…

Answered: Calculate the NPV of each project. (Use…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Project A has an IRR of 25% and an NPV of $2 million. Project B has an IRR of 20% and an NPV of $3 million. Select all the following statements that are true. Group of answer choices If the projects are mutually exclusive, select project A only If the projects are mutually exclusive, select project B only If the projects are mutually exclusive, select both projects If the projects are independent, select project A only If the projects are independent, select project B only If the projects are independent, select both projects
Connor Corporation is considering two projects (see below). For your analysis, assume these projects are mutually exclusive with a required rate of return of 12%. Project 1 Project 2 Initial investment $(684,000) $(585,000) Cash inflow Year 1 $275,000 $380,000 Should we also use the payback method to assist us in project selection? Why or why not? Explain.
Armaan Incorporation, has two investment proposals, which have the following characteristics:PROJECT A PROJECT BPERIODCOSTPROFIT AFTER TAXNET CASH FLOWCOSTPROFIT AFTER TAXNET CASH FLOW 0$9,000--$12,000-- 1 $1,000$5,000 $1,000$5,000 2 $1,000$4,000 $1,000$5,000 3 $1,000$3,000 $4,000$8,000 For each project, compute its payback period, its net present value, and its proﬁtability index using a discount rate of 15 percent.
Please describe NPV, IRR and their relationship. How do you evaluate each for making an investment decision? That is, what is a favorable NPV and IRR for making an investment decision. If you were developing a capital budgeting process at your employer, how would you prioritize your projects? What is the NPV when IRR = WACC, IRR>WACC, and IRR<WACC? There is a duplex for sale in Absecon for $700,000 at this time. It has 2 units that generate a total of $25,000 in gross rent. The property taxes are $4,000, commercial property insurance is $2,000, flood insurance is $1,000, and annual maintenance is $2,000. You expect to sell it in one year at a price growth of 0%. What is the NPV with a WACC of 10%. Is the IRR greater or less than the WACC? Would you invest in this project and why?
The Michner corporation is trying is trying to choose between the following 2 mutually exclusive design project: Cash Flow 1 Cash Flow 2 Year 0: -82000 -21700 Year 1: 37600 11200 Year 2: 37600 11200 Year 3: 37600 11200 If the required return is 10% and the company applies the profitability index decision rule, which project should the firm accept? If the company applies the NPV decision rule, which project should it take? why are a & b are different
Connor Corporation is considering two projects (see below). For your analysis, assume these projects are mutually exclusive with a required rate of return of 12%. Project 1 Project 2 Initial investment $(510,000) $(685,000) Cash inflow Year 1 $485,000 $610,000 Compute the following for each project: NPV (net present value) PI (profitability index) IRR (internal rate of return) (The answers have already been computed below for you to answer the following questions) Based on your analysis, answer the following questions Which is the best choice? Why? Which project should be selected and why? If the projects had the same IRR amounts but different NPV totals, then how would you know which project to select? Explain. What would happen if both projects had negative NPV totals? Which project would you choose? What do negative NPVs indicate? Explain. Should we also use the payback method to assist us in project selection? Why or why not? Explain…
Consider the following projects, X and Y where the firm can only choose one. Project X costs $1500 and has cash flows of $678, $652, $347, $111, $54, $16 in each of the next 6 years. Project Y also costs $1500, and generates cash flows of $738, $693, $405 for the next 3 years, respectively. WACC=11%.If it possible for conflicts to exist between the NPV and the IRR when independent projects are being evaluated? Explain your answer.
Suppose x1, x2, and x3 are binary variables that are equal to 1 if the corresponding project (1, 2, or 3) is selected and 0 if the corresponding project is not selected. Also, suppose that y1, y2, and y3 are variables that indicate the amount of money invested in the projects (projects can only be invested in if they are selected). The maximum investment is $2000 for project 1, $4000 for project 2, and $6000 for project 3. Which of the following constraints is needed for this problem? x3 ≤ 6000y3 6000x3 ≤ y3 6000y3 ≤ x3 y3 ≤ 6000x3
You are considering the following two projects for investment: Project A Project B Year 0 ($10000) ($5000) Year 1 $3000 $3000 Year 2 $7000 $4000 Year 3 $9000 $5000 You must conduct an analysis using your knowledge of capital budgeting (NPV, IRR ect, ) and time value of money to decide which of the options is better. All analysis must be done in Excel. (This will require all calculations to be done using cell references and excel functions). Your analysis will require you to: A. Calculate thefollowing values for the investment proposals: i. The payback period assuming end-of-the-year cash flows. ii. The discounted payback period assuming a required rate of return of 10% and ending of-the-year cash flows. iii. The NPV of each project. iv. The PI of each…
NOTE: Provide a format and show your work (example: N = 6, PV = XXX, I = X%, etc.) 1. As the project manager at Jelz, Inc., you are considering a project that will cost $4,276 and produce cash flows of $1,050 in year 1, $1,250 in year 2, $1,250 in year 3, and $1,550 in year 4. Find the rate of return for the project and determine if you should take the project if your required rate of return is 7.15%. (This is a 2 part question, make sure you answer both parts. Numerical answers should be rounded to 2 decimal places.) 2. You are looking to buy a car. You can afford $550 in monthly payments for five years. In addition to the loan, you can make a $6,000 down payment. If interest rates are 7.25 percent APR, what price of car can you afford (loan plus down payment)? (Do not round intermediate calculations and round your final answer to 2 decimal places.)
Connor Corporation is considering two projects (see below). For your analysis, assume these projects are mutually exclusive with a required rate of return of 12%. project 1 project 2 initial investment $(510,000) $(685,000) cash flow year 1 485,000 610,000 Compute the following for each project: NPV (net present value) PI (profitability index) IRR (internal rate of return) Based on your analysis, answer the following questions : Which is the best choice? Why? Which project should be selected and why? If the projects had the same IRR amounts but different NPV totals, then how would you know which project to select? Explain.
Pound Industries is attempting to select the best of three mutually exclusive projects. The initial investment and after-tax cash inflows associated with these projects are shown in the following table Cash flows Project A Project B Project CInitial investment (CF0) $60,000 $100,000 $110,000Cash inflows (CFt), t = 1 to 5 $20,000 $ 31,500 $ 32,500 e. Calculate the internal rate of return (IRR) for each project. f. Summarize the preferences dictated by each measure, and indicate which project you would recommend. Explain why.

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