a) What are the IRRs of these two projects? (Use the formula provided in the appendix) b) If you are told only the IRRs of the projects, which would you choose? c) What did you ignore when you made your decision in part (b)?
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- As a newly employed Chief Finance Officer of EKM School Complex, you are offered the following two mutually exclusive projects. Cash Flows(GHS) Year Project A Project B 0 -5,000 -100,000 1 4,500. 65,000 2. 4,500 65,000 a) What are the IRRs of these two projects? (Use the formula provided in the appendix) b) If you are told only the IRRs of the projects, which would you choose? c) What did you ignore when you made your decision in part (b)? d) According to the NPV rule, which one of these two projects should be pursued? Assume appropriate discount rate of 15%. Appendix For all IRR calculations please use the formula below IRR = a+(b-a)[NPV@a/NPV@a - NPV@b]A*) You are hired as financial manager in Abis Investment Co., you made cash flow projection for two different projects. You are asked to estimate the feasibility of the projects by using the following investment criteria: NPV, IRR, MIRR and BCR. They are mutually exclusive. Show all your calculation. The details of that projects are given below: Year 0 1 2 3 4 5 Project A -1,000 1,200 4600 1,800 -8,000 5,000 Project B -2,000 1,000 3600 800 8,000 500 Discount rates 12% 13% 12% 14% 15% 11%Sam Strother and Shawna Tibbs are vice presidents of Mutual of Seattle Insurance Company and co-directors of the company’s pension fund management division. An important new client, the North-Western Municipal Alliance, has requested that Mutual of Seattle present an investment seminar to the mayors of the represented cities, and Strother and Tibbs, who will make the actual presentation. C) How does one determine the value of any asset whose value is based on expected future cash flows? D)How is the value of a bond determined? What is the value of a 10-year, $1,000 par value bond with a 10% annual coupon if its required rate of return is 10%? E) What would be the value of the bond described in Part d if, just after it had been issued, the expected inflation rate rose by 3 percentage points, causing investors to require a 13% return? Would we now have a discount or a premium bond?
- can you please answer the second part from question b towards the end because an expert already answered the first part Bruin, Inc., has identified the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 –$ 28,700 –$ 28,700 1 14,100 4,150 2 12,000 9,650 3 9,050 14,900 4 4,950 16,500 a-1 What is the IRR for each of these projects? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) a-2 Using the IRR decision rule, which project should the company accept? Project A Project B a-3 Is this decision necessarily correct? Yes No b-1 If the required return is 12 percent, what is the NPV for each of these projects? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) b-2…Wonder Plc is considering two investment projects in another city and the estimated cash flows are as follows: Year HOTELS HOUSING £ (m) £ (m) 0 Capital outlay (200) (250) Net cash flow 1 130 130 2 60 120 3 80 120 4 100 80 4 Residual value 20 40 Required: (a) Assess the viability of these two projects using NPV and Payback period as the appraisal techniques and advise Wonder Plc’s Board of Directors accordingly. (b) Explain the importance of Payback period to the CEO.Claire is choosing between two projects but can only take one.The cash flows for the projects are given in the following table: Project Year 0 Year 1 Year 2 Year 3 Year 4 A −$47.6 million−$47.6 million +$24 million+$24 million +$20 million+$20 million +$21 million+$21 million +$17 million+$17 million B −$105.6 million−$105.6 million +$20 million+$20 million +$39 million+$39 million +$50 million+$50 million +$61 million+$61 million All answers in 2 d.p (a-1) The IRR of project A is (a-2) The IRR of project B is (b) If Claire's discount rate is 4.64.6%, the NPV for project A is $$ If Claire's discount rate is 4.64.6%, the NPV for project B is $$ (c) Why do IRR and NPV rank the two projects differently?(Select from the drop-down menus.) NPV and IRR rank the two projects differently because they are measuring different things. (1) NPV/IRR is measuring value creation, while (2) NPV/IRR is measuring return on investment. Because returns do not scale with different levels…
- Fransico Ltd. is trying to determine which of three projects it wants to invest in. All three projects have been analyzed into Net Present Value amounts. (Round your answers to two decimal places when needed and use rounded answers for all future calculations). 1. Calculate the Net Present Value based on the following information: Cash Flows Project 2 Project 6 Project 12 Present Value of net cash inflows $491,900 $778,300 $503,700 Initial InvestmentSingle line $146,000Single line $407,400Single line $206,400Single line Single lineNet Present ValueDouble line Single lineDouble line Single lineDouble line Single lineDouble line 2. Calculate the Profitability Index for each of the projects. Round to two decimal places. Project Present value of net cash inflows / Initial Investment = Profitability Index 2 / = 6 / = 12 / = 3. Based on the Profitability Index, which project should be selected?Please show all work on excel. You just got hired by McKinsey & Company as a financial consultant and they’re paying you an egregious amount of money. Accordingly, they have you working on the tough projects – like this one… Consider the following two mutually exclusive projects available to the firm. Free cash flows for Projects A and B are provided below. Assume the two projects have essentially the same level of riskiness, and your prior analysis indicates that the appropriate risk-adjusted hurdle rate (i.e., the WACC) is 7.45% for both projects. Perform the analysis below and make a recommendation as to which project to pursue. Year 0 1 2 3 4 5 6 Project A -$3,200 $700 $700 $700 $700 $700 $700 Project B -$600 $58 $58 $695 B. Compute the NPV for both projects using the crossover rate as the discount rate. What do you find? c. Compute the NPV for each project (using the WACC of 7.45% as the discount rate). Based on NPV, which project should be selected? Note:-…A company has a 13% WACC and is considering two mutually exclusive investments (that cannot be repeated) with the following cash flows: 0 1 2 3 4 5 6 7 Project A -$300 -$387 -$193 -$100 $600 $600 $850 -$180 Project B -$405 $131 $131 $131 $131 $131 $131 $0 The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below. What is each project's NPV? Round your answer to the nearest cent. Do not round your intermediate calculations. Project A: $ Project B: $ What is each project's IRR? Round your answer to two decimal places. Project A: % Project B: % What is each project's MIRR? (Hint: Consider Period 7 as the end of Project B's life.) Round your answer to two decimal places. Do not round your intermediate calculations. Project A: % Project B: % From your answers to parts a-c, which project would be selected? _________Project…
- Carol, Inc. is considering three different independent investment opportunities. The present value of future cash flows, initial investment, and net present value for each of the projects are as follows: Project A Project B Project C Present value of future cash flows $ 651,200 $ 476,700 $ 585,200 Initial investment 280,000 235,000 270,000 Net present value $ 371,200 $ 241,700 $ 315,200 In what order should Carol prioritize investment in the projects? Multiple Choice A, B, C C, A, B C, B, A A, C, BArmaan 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$8,000 For each project, compute its payback period, its net present value, and its profitability index using a discount rate of 15 percent.Working with your assigned group, please determine your answer to the questions below. We will discuss your group's responses during the live session this week. Consider the following two mutually exclusive projects: Year Cash Flow ($) - A Cash Flow ($) - B 0 -4,55,000 -65,000 1 58,000 31,000 2 85,000 28,000 3 85,000 25,500 4 5,72,000 19,000 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? If you apply the discounted payback criterion, which investment will you choose? If you apply the NPV criterion, which investment will you choose? If you apply the IRR criterion, which investment will you choose? If you apply the profitability index criterion, which investment will you choose? Based on your answers, which project will you finally choose?