QUESTION 1 Suppose that you are working as a capital budgeting analyst in a finance department of a firm and you are going to evaluate two mutually exclusive projects by implementing different capital budgeting techniques. The cash flows for these two projects are given below. CASH FLOW (A) -$17,000 8,000 7,000 5,000 3,000 CASH FLOW (B) -$17,000 2,000 5,000 9,000 9,500 YEAR 3 4 1 Calculate the Payback Period of each project. Which project should you accept according to this method? Explain whether the Payback Period is or is not an appropriate method in this case.

QUESTION 1 Suppose that you are working as a capital budgeting analyst in a finance department of a firm and you are going to evaluate two mutually exclusive projects by implementing different capital budgeting techniques. The cash flows for these two projects are given below. CASH FLOW (A) -$17,000 8,000 7,000 5,000 3,000 CASH FLOW (B) -$17,000 2,000 5,000 9,000 9,500 YEAR 3 4 1 Calculate the Payback Period of each project. Which project should you accept according to this method? Explain whether the Payback Period is or is not an appropriate method in this case.

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter9: Corporate Valuation And Financial Planning

Section: Chapter Questions

Problem 2P: AFN Equation Refer to Problem 9-1. What would be the additional funds needed if the companys...

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AFN EQUATION Refer to Problem 16-1. What additional funds would be needed if the companys year-end 2019 assets had been 4 million? Assume that all other numbers are the same. Why is this AFN different from the one you found in Problem 16-1? Is the companys capital intensity the same or different? Explain.
AFN Equation Refer to Problem 9-1. What would be the additional funds needed if the companys year-end 2018 assets had been 7 million? Assume that all other numbers, including sales, are the same as in Problem 9-1 and that the company is operating at full capacity. Why is this AFN different from the one you found in Problem 9-1? Is the companys capital intensity ratio the same or different?
Capital Budgeting Assume you are evaluating two mutually exclusive projects, the cash flows of which appear below and that your company uses a cost of capital of 12% to evaluate projects such as these. Time Project A Cash Flows Project B Cash Flows 0 -$300,000 -$405,000 1 -387,000 134,000 2 -193,000 134,000 3 -100,000 134,000 4 600,000 134,000 5 600,000 134,000 6 850,000 134,000 7 -180,000 0 Assuming a cost of capital of 14%, which of these projects should be accepted?
Capital Budgeting Assume you are evaluating two mutually exclusive projects, the cash flows of which appear below and that your company uses a cost of capital of 12% to evaluate projects such as these. Time Project A Cash Flows Project B Cash Flows 0 -$300,000 -$405,000 1 -387,000 134,000 2 -193,000 134,000 3 -100,000 134,000 4 600,000 134,000 5 600,000 134,000 6 850,000 134,000 7 -180,000 0 Under what conditions on the cost of capital should project B be preferred to project A?
Capital Budgeting Assume you are evaluating two mutually exclusive projects, the cash flows of which appear below and that your company uses a cost of capital of 12% to evaluate projects such as these. Time Project A Cash Flows Project B Cash Flows 0 -$300,000 -$405,000 1 -387,000 134,000 2 -193,000 134,000 3 -100,000 134,000 4 600,000 134,000 5 600,000 134,000 6 850,000 134,000 7 -180,000 0 Calculate the payback period and discounted payback period for projects A & B.
Capital Budgeting Assume you are evaluating two mutually exclusive projects, the cash flows of which appear below and that your company uses a cost of capital of 12% to evaluate projects such as these. Time Project A Cash Flows Project B Cash Flows 0 -$300,000 -$405,000 1 -387,000 134,000 2 -193,000 134,000 3 -100,000 134,000 4 600,000 134,000 5 600,000 134,000 6 850,000 134,000 7 -180,000 0 Calculate the IRR and MIRR of projects A & B. Assume a reinvestment rate of 12% for the calculation of MIRR.
Capital Budgeting Assume you are evaluating two mutually exclusive projects, the cash flows of which appear below and that your company uses a cost of capital of 12% to evaluate projects such as these. Time Project A Cash Flows Project B Cash Flows 0 -$300,000 -$405,000 1 -387,000 134,000 2 -193,000 134,000 3 -100,000 134,000 4 600,000 134,000 5 600,000 134,000 6 850,000 134,000 7 -180,000 0 If Project A and Project B are independent, which project should be undertaken?
Suppose that you are working as a capital budgeting analyst in a finance department of a firm and you are going to evaluate two mutually exclusive projects by implementing different capital budgeting techniques. The cash flows for these two projects are given below. YEAR CASH FLOW (A) CASH FLOW (B) 0 -$17,000 -$17,000 1 8,000 2,000 2 7,000 5,000 3 5,000 9,000 4 3,000 9,500 Calculate the Internal Rate of Returns (IRR) for both projects (use excel). Which project should you accept? Evaluate the IRR values of these two projects.
Suppose that you are working as a capital budgeting analyst in a finance department of a firm and you are going to evaluate two mutually exclusive projects by implementing different capital budgeting techniques. The cash flows for these two projects are given below. YEAR CASH FLOW (A) CASH FLOW (B) 0 -$17,000 -$17,000 1 8,000 2,000 2 7,000 5,000 3 5,000 9,000 4 3,000 9,500 1) Suppose that the discount rate is 11%. Calculate the Net Present Values (NPV) of both projects. Which project should you accept according to NPV? Evaluate your findings.