00:04Touch to return to call 01:15Back Chpater 5 focal points[2190](C) Which project should be adopted? Why? (4)- Market, Inc. has given you the following information on the two mutually exclusive2 of 3 Cash Flowsconsideration:1YearProject AProject B(60 000)(R30 000)10 000120 00010 00020 000310 00020 000410 00020 000510 00020 000Wang requires a 14 percent rate of return on projects of this nature.(a) Compute the internal rate of return on both projects. (4)(b) Compute the profitability index of both projects. (4)(c) Compute the payback period of both projects. (4)(d) Which of the two projects, if either, should Wang accept? Why? (4)3.Service Corporation is investigating four different opportunities. Information on the four projectsunder study is as follows:Project 1R480,000567,270R87,2706 yearsProject 2R360,000433,400R73,40012 yearsProject 4R450,000522,970R72,9703 yearsProject 3R270,000Investment requiredPresent value of cash inflowsNet present valueLife of project336,140R66,1406 yearsThe company's required rate of return is 10%; therefore a 10% discount rate has been used inthe present value computations above. Limited funds are available for investment, so thecompany cannot accept all of the available projects.Required:a) Compute the project profitability index and Net Present Value for each investment project.Decide which projects would be preferred based on your answers for each method ofevaluation.Kerr Jewelers has R300,000 to invest. The company is trying to decide between two alternativeuses of the funds:Project A Project BROR300,000R60,000ROR300,000Cost of equipment requiredWorking capital investment requiredAnnual cash inflowsSalvage value of equipment in 7 yearsLife of the projectROR80,000R20,00007 years7 yearsThe working capital needed for Project B will be released for investment elsewhere at the end of7 years. Kerr Jewelers uses a 20% discount rate.Required:2

Because you have posted multiple questions we will answer the first question and for the remaining…

Answered: Project A (R30 000) Project B Year (60…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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The project's NPV? WACC: 10.00% Year 0 1 2 3 Cash flows -$1,000 $450 $460 $470
Q.1 Cash flows for two mutually exclusive projects are shown below: Year CFM CFN 0 -200 -200 1 85 60 2 85 85 3 85 110 Both projects have a cost of capital of 10%. a(ii). Calculate the payback for CFn project
Ch 5. The following project has cash flows as follows: Year Project A 0 -$705,000 1 $225,000 2 $421,500 3 $275,000 What is the IRR? Round to one place past the decimal point and format as "XX.X"
Q.1 Cash flows for two mutually exclusive projects are shown below: Year CFM CFN 0 -200 -200 1 85 60 2 85 85 3 85 110 Both projects have a cost of capital of 10%. b (i). Calculate the discounted payback for CFm project
A4 9a We find the following information on NPNG (No-Pain-No-Gain) Inc.: A4 9a EBIT = $2,000,000Depreciation = $250,000Change in net working capital = $100,000Net capital spending = $300,000 These numbers are projected to increase at the following supernormal rates for the next three years, and 5% after the third year for the foreseeable future: EBIT: 20%Depreciation: 10%Change in net working capital: 15%Net capital spending: 10% The firm’s tax rate is 35%, and it has 1,000,000 outstanding shares and $8,000,000 in debt. We have estimated the WACC to be 15%. a. Calculate the EBIT, Depreciation, Changes in NWC, and net capital spending for the next four years.
$1897 mibns 000,0062 sw I Y al coles a bl 6) The Kaufmann Group is considering a $364,000 investment with the following net cash flows. Kauffman requires a 12% return on its investments. Annual Net Cash Flows Present Value of $1 at 12% Initial investment 1.0000 Year 1 $ 124,000 0.8929 Year 2 84,000 0.7972 Year 3 144,000 0.7118 Year 4 s istos bas 000,00 254,000 svenistot 008,20 0.6355 by Year 5 74,000 0.5674 The present value of this investment is: A) B) C) D) E) $483,588. $161,576. $119,588. $230,308. $281,005.
A4 9c We find the following information on NPNG (No-Pain-No-Gain) Inc.: EBIT = $2,000,000Depreciation = $250,000Change in net working capital = $100,000Net capital spending = $300,000 These numbers are projected to increase at the following supernormal rates for the next three years, and 5% after the third year for the foreseeable future: EBIT: 20%Depreciation: 10%Change in net working capital: 15%Net capital spending: 10% The firm’s tax rate is 35%, and it has 1,000,000 outstanding shares and $8,000,000 in debt. We have estimated the WACC to be 15%. c. Calculate the firm’s share price at time 0.
Cash Flow (1,650,000) 330,000 365,000 380,000 415,000 405,000 370000 294,000 Insert your answer. 5. If a company has a required rate of return of 15%, should the following project be accepted based on these expected cash flows below?
#14 NPV verse IRR Here is the cash flow for two mutually exclusive projects. Project C0 C1 C2 C3 A -$20,000 $8,000 $8,000 $8,000 B -$20,000 0 0 $25,000 At what interest rate would you prefer project A to B? ( NPV Value) What is the IRR of each project?
P10–12 Payback and NPV  Neil Corporation has three projects under consideration. The cash flows for each project are shown in the following table. The firm has a 16% cost of capital. Project A Project B Project C Initial investment (CF0) −$40,000 −$40,000 −$40,000 Year (t) Cash inflows (CFt) 1    $13,000    $  7,000    $19,000 2      13,000      10,000      16,000 3      13,000      13,000      13,000 4      13,000      16,000      10,000 5      13,000      19,000        7,000 Calculate each project’s payback period. Which project is preferred according to this method? Calculate each project’s net present value (NPV). Which project is preferred according to this method? Comment on your findings in parts aand b, and recommend the best project. Explain your recommendation.
Question 21 The following information relates to three possible capital expenditure projects. Because of capital rationing only one project can be accepted. Project:                                         A                                 B                                C      . Initial cost                               R100 000                    R115 000                    R90 000 Expected life                               5 years                         5 years                         4 years Scrap value                               R5 000                        R7 500                          R4 000 Cash-inflows                                  R                                 R                                 R End year 1                                   40 000                         50 000                        27 500                2                                   35 000                         35 000                        32 500…
Question 15 The following information relates to three possible capital expenditure projects. Because of capital rationing only one project can be accepted. Project:                                         A                                 B                                C      . Initial cost                               R100 000                    R115 000                    R90 000 Expected life                               5 years                         5 years                         4 years Scrap value                               R5 000                        R7 500                          R4 000 Cash-inflows                                  R                                 R                                 R End year 1                                   40 000                         50 000                        27 500                2                                   35 000                         35 000                        32 500…

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