1. Murdoch Pty Ltd is considering three mutually exclusive projects. The initial cash outflow and after-tax cash inflows associated with each project are show in the following table: Cash Flows Initial Cash Outflow Cash Inflows Years 1-5 Project X ($) Project Y ($) Project Z ($) 50,000 100,000 115,000 27,000 41,000 43,000 A) Calculate the payback period for each period B) Calculate the NPV of each project assuming, that the company has a cost of capital equal to 13%

1. Murdoch Pty Ltd is considering three mutually exclusive projects. The initial cash outflow and after-tax cash inflows associated with each project are show in the following table: Cash Flows Initial Cash Outflow Cash Inflows Years 1-5 Project X ($) Project Y ($) Project Z ($) 50,000 100,000 115,000 27,000 41,000 43,000 A) Calculate the payback period for each period B) Calculate the NPV of each project assuming, that the company has a cost of capital equal to 13%

Financial And Managerial Accounting

15th Edition

ISBN:9781337902663

Author:WARREN, Carl S.

Publisher:WARREN, Carl S.

Chapter26: Capital Investment Analysis

Section: Chapter Questions

Problem 2CMA: Staten Corporation is considering two mutually exclusive projects. Both require an initial outlay of...

See similar textbooks

Similar questions

Staten Corporation is considering two mutually exclusive projects. Both require an initial outlay of 150,000 and will operate for five years. The cash flows associated with these projects are as follows: Statens required rate of return is 10%. Using the net present value method and the present value table provided in Appendix A, which of the following actions would you recommend to Staten? a. Accept Project X and reject Project Y. b. Accept Project Y and reject Project X. c. Accept Projects X and Y. d. Reject Projects X and Y.
Project S has a cost of $10,000 and is expected to produce benefits (cash flows) of $3,000 per year for 5 years. Project L costs $25,000 and is expected to produce cash flows of $7,400 per year for 5 years. Calculate the two projects’ NPVs, IRRs, MIRRs, and PIs, assuming a cost of capital of 12%. Which project would be selected, assuming they are mutually exclusive, using each ranking method? Which should actually be selected?
Murdoch Pty Ltd is considering threemutually exclusive projects. The initial cashoutflow and after-tax cash inflowsassociated with each project are show inthe following table:Cash FlowsProjectX ($)ProjectY ($)ProjectZ ($)Initial CashOutflowCash InflowsYears 1-550,000100.000115,00027.00041,00043.000 A) Calculate the payback period for each period B) Calculate the NPV of each project assuming,that the company has a cost of capital equal to13% C) Calculate IRR for each project. D) Summarise the preferences dictated by eachmeasure, and indicate which project you wouldrecommend. Explain why. 2. Whale Wash Limited issued eleven-year bondsone year ago at a coupon rate of 7.5%. Thebonds have a face value of $150.000 and makesemi-annual payments. It the YTM on the bondsis 8.6% p.al, what is the current bond price? 3. Why does the value of a share depend on adividend? 4. Perth Limited has just paid an annual dividendper share of $0.75. The firm expects thatdividends will grow at a rate of 8%…
a company is deciding between two mutually exclusive projects. the cash flows are shown below. year 0 project a -$1,000 project b -$1,000 ywar 1 project a 550 project b 400 year 2 project a 550 projecy b 600 year 3 project a 550 project b 900 if the cosy of capital is 10% which project should the compsny select
Garage, Inc., has identified the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 -$43,500 -$43,500 1 21,400 6,400 2 18,500 14,700 3 13,800 22,800 4 7,600 25,200 What is the IRR for each of these projects? Using the IRR decision rule, which project should the company accept? Is this decision necessarily correct? If the required return is 11 percent, what is the NPV for each of these projects? Which project will the company choose if it applies the NPV decision rule? Over what range of discount rates would the company choose project? A? Project B? At what discount rate would the company be indifferent between these two projects? 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 C Initial Investment (CFo) $60,000 $100,000 $110,000 Cash ınflows (CFt), t=1 to 5 20,000 31,500 32,500 a.Calculate the payback period for each project. b.Calculate the net present value (NPV) of each project, assuming that the firm has a cost of capital equal to 13%. c.Calculate the internal rate of return (IRR) for each project. d.Summarize the preferences dictated by each measure, and indicate which project you would recommend. Explain why.
Bruin, Incorporated, has identified the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 −$ 66,000 −$ 66,000 1 42,000 28,400 2 36,000 32,400 3 24,000 38,000 4 15,200 24,400 a-1. What is the IRR for each of these projects? a-2. If you apply the IRR decision rule, which project should the company accept? b-1. Assume the required return is 12 percent. What is the NPV for each of these projects? b-2. Which project will you choose of you apply the NPV decision rule? c-1. Over what range of discount rates would you choose Project A? c-2. Over what range of discount rates would you choose Project B? d. At what discount rate would you be indifferent between these two projects?
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 x. Calculate the payback period for each project.y. Calculate the net present value (NPV) of each project, assuming that the firm has a cost of capital equal to 13%.
abc pvt ltd is considering two mutually exclusive capital investments. the projects expected net cash flows are as follows: year project a project b 0 -375 -575 1 -300 190 2 -200 190 3 -100 190 4 600 190 5 600 190 6 926 190 7 -200 0 if you were told that each projects cost of capital was 12%, whic project sholud be selected using the NPV criteria? what is each projects IRR? what is the regular payback period for these two projects? what is the portfolio index for each project if the cost of capital is 12%? 1.explain the portfolio index of each project if the cost of capital is 12%?
abc pvt ltd is considering two mutually exclusive capital investments. the projects expected net cash flows are as follows: year project a project b 0 -375 -575 1 -300 190 2 -200 190 3 -100 190 4 600 190 5 600 190 6 926 190 7 -200 0 if you were told that each projects cost of capital was 12%, whic project sholud be selected using the NPV criteria? what is each projects IRR? what is the regular payback period for these two projects? what is the portfolio index for each project if the cost of capital is 12%?
Org Pvt. Ltd. is considering two mutually exclusive capital investments. The project’s expected net cash flows are as follows: Expected Cash Flows Year Project A Project B0 -400 -575 1 95 150 2 110 200 3 118 250 4 125 275 5 140 230 6 150 180 each project’s cost of capital was 10% b. What is each project’s IRR?
CRAYON corporation has identified the following two mutually exclusive projects: YEAR Cash flow ( A) Cash flow ( B) 0 -$300,000 -$300,000 1 68,950 135,000 2 83,900 105,500 3 93,200 75,000 4 105,600 55,600 5 115,600 45,600 What is the IRR for each of this project (range: 10-16%)? Using the IRR decision rule, which project should the company accept? How do you interpret IRR of a project? If the required return is 15%, what is the NPV of these projects? Which project will the company choose if it applies the NPV decision rule? How do you interpret NPV of a project? Calculate the Payback period and discounted pay back period of these projects! Which project should the company accept? What are the differences of payback period and discounted payback…