K10. Current Attempt in ProgressBonita Company is considering two different, mutually exclusive capital expenditure proposals Project A will cost $476.000, hamexpected useful life of 13 years and a salvage value of zero, and is expected to increase net annual cash flows by $67,000 Project willcost $319,000, has an expected useful life of 13 years and a salvage value of zero, and is expected to increase net annual cash flow by$47.000 A discount rate of 8% is appropriate for both projectsClick here to view the factor tableCalculate the net present value and profitability index of each project. Of the net present value is negative, use either a negative signpreceding the number eg -45 or parentheses eg (45). Round present value answers to 0 decimal places, es 125 and profitability inderanswers to 2 decimal places, eg. 15.52. For calculation purposes, use 5 decimal places as displayed in the factor table provided, es 1.25124)Net present valueProfitability indexProject AWhich project should be accepted based on net present value?should be accepted.Project

Net Present Value (NPV) is the present worth of the cash flows to be received or paid in the future…

Calculate the net present value and profitability index of each project. Of the net present value is negative, use either a negative sign preceding the number eg -45 or parentheses eg (45) Round present volue answers to 0 decimal places, es 125 and profitability index answers to 2 decimal places, eg 15.52. For calculation purposes, use 5 decimal places on displayed in the factor table provided 1.25124)

Calculate the net present value and profitability index of each project. Of the net present value is negative, use either a negative sign preceding the number eg -45 or parentheses eg (45) Round present volue answers to 0 decimal places, es 125 and profitability index answers to 2 decimal places, eg 15.52. For calculation purposes, use 5 decimal places on displayed in the factor table provided 1.25124)

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter12: Capital Budgeting: Decision Criteria

Section: Chapter Questions

Problem 15P: The Pinkerton Publishing Company is considering two mutually exclusive expansion plans. Plan A calls...

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.
CAPITAL BUDGETING CRITERIA: MUTUALLY EXCLUSIVE PROJECTS Project S requires an initial outlay at t = 0 of 17,000, and its expected cash flows would be 5,000 per year for 5 years. Mutually exclusive Project L requires an initial outlay at t = 0 of 30,000, and its expected cash flows would be 8,750 per year for 5 years. If both projects have a WACC of 12%, which project would you recommend? Explain.
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 .
Capital rationing decision involving four proposals Kopecky Industries Inc. is considering allocating a limited amount of capital investment funds among four proposals. The amount of proposed investment, estimated income from operations, and net cash flow for each proposal are as follows: The company’s 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 allprojects. 1f the preceding standards are met, the net present value method and presentvalue indexes are used to rank the remaining proposals. Instructions Compute the present value index for each oldie proposals in part (4). Round to two decimal places.