Calculate discounted payback period of Project A and B Calculate net present value of A and B Which is more acceptable?
Q: Describe the Project Cost of Capital: Risk-Adjusted Discount Rate Approach?
A: The cost of capital is the return required to make a capital budgeting venture advantageous, for…
Q: what is the discounted payback period for the investment?
A: Payback Period is the calculation of periods or years within which cost of investment is recovered.…
Q: Calculate Net Present Value and Actual Rate of return for both the projects.. How will you evaluate…
A: Net present value of the project means difference of present value of all expected cash inflows from…
Q: 1. How much is payback period (PP)? Should the project be accepted or rejected? 2. How much is…
A: Capital budgeting is a process used by the companies to use its limited resources to get the best…
Q: Which of the following best explains the limitations of usin discount rate for evaluating projects?
A: Note: 'Since you have asked multiple questions, we will solve the first question for you. If you…
Q: Evaluate the two alternatives A and B and decide the economic justified alternative using: Present…
A: Comment- Since we only answer up to 3 sub-parts, we’ll answer the first 3. Please resubmit the…
Q: /hat is the project's discounted payback period?
A: In the payback period method, the time value of money is not taken into consideration in order to…
Q: Your firm is considering what has been estimated to be a positive NPV project (NPV > 0). What can…
A: Net Present Value (NPV) is based on the time value of money and is calculated as the sum of present…
Q: What is the present value index for Project A?
A: Present Value Index: It represents the ratio of the project's net present value to the initial cost…
Q: Please explain why the net present value (NPV) method is preferred over the payback method when…
A: NPV method is preferred over payback method because of following reasons 1. NPV method shows project…
Q: /hat is the internal rate of return of the proposed project?
A: IRR(INTERNA RATE OF RETURN), is the rate that equates the present value of cash flows and the future…
Q: What are the factors affecting the discount rate used in project valuation?
A: Higher discount rate provides less value and lower the discount rate higher the value of the…
Q: One must know the discount rate of an investment project to compute its: a. NPV and PI. b. NPV…
A: NPV: For computing NPV, discounted cash flows and initial cash outflow is necessary Hence, the…
Q: Evaluate the projects using each of the following criteria, stating which project(s) Insignia…
A: Payback period is the time taken by project cash inflows to recover initial investment. Discounted…
Q: pted when profitability index will be greater than one b. All statements are corre
A: Profitability index indicates present value of cash inflows as no. of times of present value of cash…
Q: ould you use the Figure below that shows the net present value profile of two projects Y and W to…
A: Internal rate of return of a project is the discount rate at which the NPV of project is 0. The…
Q: formula for the internal rate of return on this project.
A: Note: Since you have posted a question with multiple sub-parts, we will solve the first three…
Q: a. Determine the payback period of each project. b. Which project is acceptable based on payback…
A: Payback period = (Year of last negative cash flow+(Absolute value of last negative cash flow/Next…
Q: Which of the following decision measures should capital budgeting decision makers consider? Select…
A: Solution:- Capital budgeting means investment decision. It involves various methods and techniques…
Q: Can we select projects according to their corresponding payback period?
A: Capital Budgeting is a process which helps the firm to determine the expected cash flows of a…
Q: Projects with _____are preferred. O a. Lower payback period. O b. Normal payback period.…
A: The payback period is a concept of capital budgeting whereby the number of periods is given after…
Q: choosing the most desirable Project using Payback period а. b. Discounted payback c. Net Present…
A: The calculations and the steps can be seen below:
Q: Compare capital budgeting decision criteria, Net Present Value (NPV) and Internal Rate of Return…
A: Part (1): Answer: Net present value approach predicts how much a future project would add to the…
Q: According to the Discounted Payback method, which project should be selected? What is the chief…
A: According to the given information, Project D is said to have lesser discounted payback period…
Q: When does the project reach the payback point?
A: The payback period alludes to what extent it takes for a speculator to hit breakeven to recoup the…
Q: 1. State the criterion for accepting or rejecting independent projects under each of the following…
A: Capital budgeting is a technique to evaluate long term projects. For evaluating, various methods are…
Q: method. Does the project offer an acceptable rate of return? Evaluate the profitability measure…
A: Revenue = $11 *106 Fixed costs = $2*106 Variable cost = $7*106 Depreciation is $2.4 *106 /year for…
Q: Calculate cach project's Payback Peried. Based on the payback periods, which project(s) should they…
A: Payback Period: It is the period in which the investment or project recovers its initial cost. A…
Q: Required: (Evaluate the projects using each of the following criteria, stating which project(s)…
A: Information Provided: Required rate = 15%Years = 4
Q: The method that measures a projects return based on present values is the: Internal Rate of Return…
A: The current value of an investment based on the return, which will be received on a predefined…
Q: .
A: a. Payback period b. Internal rate of return c. Profitability index d. Net present value
Q: a) Calculate the Internal Rate of Return (IRR), Profitability Index (PI) and Payback period for both…
A: The calculation for Option 1 using excel:
Q: a. For each alternative project compute the net present value. b. For each alternative project…
A: Net Present Value (NPV) is measure through which we evaluate the financial viability of any project.…
Q: Describe the Incremental Analysis for Cost-Only Projects?
A: The incremental cost is the additional cost incurred for producing an additional one unit of a…
Q: What is the project’s discounted payback period?
A: Discount rate: It is the interest rate to determine the PV of future cash inflows from the project
Q: What type of projects does the Payback method favor?
A: Payback method: It implies to a method of evaluating investment projects by computing the time, it…
Q: Which provides a better estimate of a project’s “true” rate of return, the MIRR or theregular IRR?…
A: Internal rate of return (IRR): The internal rate of return (IRR) is a measure utilized in capital…
Q: What is the typical discount rate used with the Net Present Value (NPC) when project risk is the…
A: The net present value (NPV) is the discounted value of benefits less the initial costs. The values…
Q: If the net present value of a proposed investment is negative, what is the discount rate used? Less…
A: Net present value (NPV) is the significant present value difference between cash outflows and cash…
Q: Which project should be selected based on incremental IRR?
A: IRR stands for internal rate of return refers to the percentage of return on capital invested by the…
Q: a. If the discount rate is 0%, what is the project's net present value? b.lf the discount rate is…
A: Hi There, thanks for posting the question. But as per Q&A guidelines, we must answer the first…
Q: Define each of the following terms: f. Risk-adjusted discount rate; project cost of capital
A: Financial term is referred as the terms which indicates the financial factors which depends on…
Q: What is the project’s payback period?
A: Payback period: A project's payback period can be described as the number of years to recover the…
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- 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?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.Jasmine Manufacturing is considering a project that will require an initial investment of $52,000 and is expected to generate future cash flows of $10,000 for years 1 through 3, $8,000 for years 4 and 5, and $2,000 for years 6 through 10. What is the payback period for this project?
- Redbird Company is considering a project with an initial investment of $265,000 in new equipment that will yield annual net cash flows of $45,800 each year over its seven-year life. The companys minimum required rate of return is 8%. What is the internal rate of return? Should Redbird accept the project based on IRR?Edelman Engineering is considering including two pieces of equipment, a truck and an overhead pulley system, in this year’s capital budget. The projects are independent. The cash outlay for the truck is $17,100, and that for the pulley system is $22,430. The firm’s cost of capital is 14%. After-tax cash flows, including depreciation, are as follows: Calculate the IRR, the NPV, and the MIRR for each project, and indicate the correct accept/reject decision for each.There are two projects under consideration by the Rainbow factory. Each of the projects will require an initial investment of $35,000 and is expected to generate the following cash flows: Use the information from the previous exercise to calculate the internal rate of return on both projects and make a recommendation on which one to accept. For further instructions on internal rate of return in Excel, see Appendix C.
- There are two projects under consideration by the Rainbow factory. Each of the projects will require an initial investment of $35,000 and is expected to generate the following cash flows: If the discount rate is 12%, compute the NPV of each project.The Pinkerton Publishing Company is considering two mutually exclusive expansion plans. Plan A calls for the expenditure of 50 million on a large-scale, integrated plant that will provide an expected cash flow stream of 8 million per year for 20 years. Plan B calls for the expenditure of 15 million to build a somewhat less efficient, more labor-intensive plant that has an expected cash flow stream of 3.4 million per year for 20 years. The firms cost of capital is 10%. a. Calculate each projects NPV and IRR. b. Set up a Project by showing the cash flows that will exist if the firm goes with the large plant rather than the smaller plant. What are the NPV and the IRR for this Project ? c. Graph the NPV profiles for Plan A, Plan B, and Project .There are two projects under consideration by the Rainbow factory. Each of the projects will require an initial investment or $28.000 and is expected to generate the following cash flows: If the discount rate is 5% compute the NPV of each project and make a recommendation of the project to be chosen.
- Manzer Enterprises is considering two independent investments: A new automated materials handling system that costs 900,000 and will produce net cash inflows of 300,000 at the end of each year for the next four years. A computer-aided manufacturing system that costs 775,000 and will produce labor savings of 400,000 and 500,000 at the end of the first year and second year, respectively. Manzer has a cost of capital of 8 percent. Required: 1. Calculate the IRR for the first investment and determine if it is acceptable or not. 2. Calculate the IRR of the second investment and comment on its acceptability. Use 12 percent as the first guess. 3. What if the cash flows for the first investment are 250,000 instead of 300,000?Buena Vision Clinic is considering an investment that requires an outlay of 600,000 and promises a net cash inflow one year from now of 810,000. Assume the cost of capital is 10 percent. Required: 1. Break the 810,000 future cash inflow into three components: a. The return of the original investment b. The cost of capital c. The profit earned on the investment 2. Now, compute the present value of the profit earned on the investment. 3. Compute the NPV of the investment. Compare this with the present value of the profit computed in Requirement 2. What does this tell you about the meaning of NPV?Clearcast Communications Inc. is considering allocating a limited amount of capital investment funds among four proposals. The amount of proposed investment, estimated operating income, and net cash flow for each proposal are as follows: The companys capital rationing policy requires a maximum cash payback period of three years. In addition, a minimum average rate of return of 12% is required on all projects. If the preceding standards are met, the net present value method and present value indexes are used to rank the remaining proposals. Instructions 1. Compute the cash payback period for each of the four proposals. 2. Giving effect to straight-line depreciation on the investments and assuming no estimated residual value, compute the average rate of return for each of the four proposals. Round to one decimal place. 3. Using the following format, summarize the results of your computations in parts (1) and (2). By placing the computed amounts in the first two columns on the left and by placing a check mark in the appropriate column to the right, indicate which proposals should be accepted for further analysis and which should be rejected. 4. For the proposals accepted for further analysis in part (3), compute the net present value. Use a rate of 12% and the present value table appearing in Exhibit 2 of this chapter. 5. Compute the present value index for each of the proposals in part (4). Round to two decimal places. 6. Rank the proposals from most attractive to least attractive, based on the present values of net cash flows computed in part (4). 7. Rank the proposals from most attractive to least attractive, based on the present value indexes computed in part (5). 8. Based on the analyses, comment on the relative attractiveness of the proposals ranked in parts (6) and (7).