Cost planning assignment 6

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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

An investment project costs X. It is expected to have an annual net cash flow of 0.125X for 20 years. What is the project's payback period? Select one: 6 а. 4 years b. 2 years c. 8 years d. 6 years

Answer the following:   1 What is the payback period on each of the above projects? 2 Given that you wish to use the payback rule with a cutoff period of two years, which projects would you accept? Why? 3 If you use a cutoff period of three years, which projects would you accept? Why?

Question 4a) A firm has a choice between two investment projects, all of which involve an initial outlay of GH¢36,000. The returns at the end of the next 4 years are given below. If the interest rate is 15%, say whether each project is viable or not, and which is the best investment.Year Project A Project B1 15,000 5,0002 15,000 10,0003 15,000 20,0004 15,000 25,000All values are given in GH¢. b) A factory increase its production by 712% and produced 1290 tonnes. How many tonnes did she produce before? c) If we place GH¢100 in the savings account that yields 12% compounded quarterly, what nearest GH¢ would our investment grow to at the end of 5 years?

Question: There are Two paybacks 1) Payback period X =  6 years and 2) Payback period Y =5 years Please tell Me why machine X is financially viable?

A) Consider the following two mutually exclusive projects: Cash flow (A) -RM300,000 20,000 50,000 50,000 390,000 i) ii) Year 0 1 2 3 4 Cash flow (B) -RM40,000 19,000 12,000 18,000 10,500 If you apply the payback criterion, which investment will you choose if you set the maximum payback period of 3 years? If you apply the internal rate of return (IRR) criterion, which investment will you choose, if you require a 15% return?

4. If the terminal balance of a 5-year project at 10% s0 then which one below is true? A. The IRR of the project is less than 10% B. The future worth of the project is greater than 0 C. Discounted payback perlod is 5 years OD. The present worth of the project is less than 0 5 In an incremental IRR analysis, which analysis period should be used to compare 2 mutually altemative projects with 3 and 4 years of useful lives? (Assume an indefinite analynis perlod and that the projects are repeatable) O A. B years O B. 12 years OC. 4 years D. 3 years

1.1 How does the risk and return trade-off can be applied in real life?

1. A project that provides annual cash flows of $1,200 for nine years costs $6,000 today. Is this a good project if the required return is 8 percent? What if it's 24 percent? At what discount rate would you be indifferent between accepting the project and rejecting it? The graph displays the project's NPV profile NPV 1 0 -1 0.1 0.2 NPV Profile 0.3 0.4 Interest Rate

engineering economy (multiple choice) 3.) Consider a project which involves the investment of P100,000.00 now and P100,000 at the end of one year. Revenues of P150,000 will be generated at the end of years 1 and 2. What is the net present value of this project if the annual interest rate is 10%? a.) P69,421.50 b.) P67,421.50 c.) P68,421.50 d.) P65,421.50

You are considering a project that costs OMR600 and has expected cash flows of OMR224, OMR250.88 and OMR280.99 over the next three years. If the appropriate discount rate for the project's cash flows is 12%, what is the net present value of this project? Select one: O a. The NPV is negative O b. OMR 0.00 O c. OMR 9.34 O d. OMR84.75 O e. OMR49.34

Consider a project with the following cash flows: Year Cash Flow - 10000 1 5000 5000 3 5000 4 5000 If the appropriate discount rate for this project is 15%, then the net present value (NPV) is closest to: O A. $2,565 O B. $4,275 O C. $2,992 O D. $30,000

which one is the answer？ Why choose it？

Consider a project with the following cash flows: Year Cash Flow - 10000 1 4000 4000 3 4000 4 4000 Assume the appropriate discount rate for this project is 15%. The payback period for this project is closest to: O A. 3.75 О В. 2.5 О С. 3 O D. 2

Suppose you are offered a project with the following payments: Year Cash Flows 0 $ 9,800 1 −5,300 2 −4,000 3 −3,100 4 −1,700 a. What is the IRR of this offer? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. b. If the appropriate discount rate is 15 percent, should you accept this offer? c. If the appropriate discount rate is 21 percent, should you accept this offer? d-1. What is the NPV of the offer if the appropriate discount rate is 15 percent? Note: A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. d-2. What is the NPV of the offer if the appropriate discount rate is 21 percent? Note: A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.

You are considering a project with an initial cost of $8245 and a required return of 11.6%. What is the discounted payback if the expected cash flows are $3148, $3429, $2731, $3048, and $3930 respectively over the next 5 years? a. 3.66 years b. 3.66 years c. 3.36 years ✔ d. 2.96 years e. 2.98 years

5. Calculating IRR A firm evaluates all of its projects by applying the IRR rule. If the required return is 11 percent, should the firm accept the following project? LO 3 Year Cash Flow -$157,300 1 74,000 87,000 46,000

You are considering the following two mutually exclusive projects. The required rate of return is 11.25% for project A and 10.75% for project B. Which project should you accept?   YEAR PROJECT A PROJECT B 0 -$48,000 -$126,900 1 $18,400 $69.700 2 $31,300 $80,900 3 $11,700 $0

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What is the approximate maximum amount that a firm should consider paying for a project that will return $15,000 annually for 5 years if the opportunity cost is 10%?  Select one: a.$33,520 b $56,860 c. $62,540 d. $75,000

Ll 2 just need last one fixed

Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 −$350,000 −$35,000 1 25,000 17,000 2 70,000 11,000 3 70,000 17,000 4 430,000 11,000 Assume you require a 15 percent return on your investment and a payback of 4 years. 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), what you can say anything about the IRR of both projects? which project will you finally choose? Why?

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If you invest $131,300 in a project which yields an annual return of $25,400, how many years will it take to recover your investment if the annual interest rate is 5.5%? a. 8 O b. 5 О с. 7 d. 6 е. 9

Consider a project with the following cash flows: End of Year (n)          Cash Flows ($)0                                  -$22,4001                                       4,5002                                     12,6703                                     14,7804                                     13,6505                                     11,4406                                       7,800(a) At an interest rate of 18%, what is the discounted payback period?(b) What is the discounted payback period if the interest rate is 0%?

4. Calculating Discounted Payback (LO3) An investment project has annual cash inflows of $4,200, $5.300, $6.100, and $7,400, and a discount rate of 14%. What is the discounted payback period for these cash flows if the initial cost is $7.000? What if the initial cost is $10,000? What if it is $13,000?