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13) The independent projects must have positive and negative cash flows to obtain a PW value that can exceed zero, which means that they must be revenue projects.
14) capitalized cost is considered as the present worth of projects that has a short life or when the planning horizon is very short.
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- Part 1Please calculate the payback period, IRR, MIRR, NPV, and PI for the following two mutuallyexclusive projects. The required rate of return is 15% and the target payback is 4 years.Explain which project is preferable under each of the four capital budgeting methodsmentioned above: Cash flows for two mutually exclusive projects Year Investment A Investment B 0 -$5,000,000 -5,000,000 1 $1,500,000 $1,250,000 2 $1,500,000 $1,250,000 3 $1,500,000 $1,250,000 4 $1,500,000 $1,250,000 5 $1,500,000 $1,250,000 6 $1,500,000 $1,250,000 7 $2,000,000 $1,250,000 8 0 $1,600,000 Part 2 Please study the following capital budgeting project and then provide explanations for thequestions outlined below:You have been hired as a consultant for Pristine Urban-Tech Zither, Inc. (PUTZ),manufacturers of fine zithers. The market for zithers is growing quickly. The company bought some land three years ago for $2.1 million in…DRAW CASH FLOW DIAGRAM Calculate the capitalized cost of a project that has an initial cost of P8,000,000 and an additional cost of P250,000 at the end of every 8 years. The annual operating costs will be P150,000 at the end of every year for the first 5 years and P200,000 thereafter. In addition there is expected to be recurring major rework cost of P500,000 every 13 years. Assume i=12%For mutually exclusive projects, the internal rate of return and the net present value give consistent accept/reject decisions if: A.the investment projects have identical cash flows in the final year. B.the required rate of return is less than the discount rate, which causes the net present value profiles of the two projects to intersect. C.the net present value profiles for both projects do not intersect. D.the investment projects have equal lives.
- What process does the net present value method use to help management determine whether a project is acceptable to a company? Options : A. It discounts net cash flows to their present value and then compares that value to the capital outlay required by the project.B. It determines the interest rate that will cause the present value of the capital expenditure to equal the present value of the expected net cash flows.C. It divides the present value of net cash flows by the initial investment to determine the profitability index of the project.D. It identifies the time period required to recover the cost of the capital investment from the net annual cash flow produced by the project.3 Question 16 It makes no difference in the final answer if a rate of return equation is expressed in terms of P, A, or F. True or False Question 24 In the case of independent projects, only those projects for which the net present value is greater than or equal to 0 are retained. Options for question 24: True or FalseWhat is the B/C Ratio for a firm considering an investment in a new manufacturing technology? Investment = $2,500,000 Salvage Value = $150,000 MARR = 15% Net Annual Savings = $600,000 Project Life = 10 years Please don't just use excel, please show steps..
- n Project A Project B 0 -$7,000 -$5,000 1 -$2,500 -$2,000 2 -$2,000 -$2,000 3 -$1,500 -$2,000 4 -$1,500 -$2,000 5 -$1,500 -$2,000 6 -$1,500 -$2,000 7 - -$2,000 8 - - Suppose projects A and B are mutually exclusive. The required service period is 8 years and comparable equipment will be leased for $3,000 per year payable at the end of each year for the remaining years of the required service period. Which project is a better choice at 15%? Use PW(15%) criterion and show your equation with numbers plugged into factors and your numerical result for each option.Complete Solution needed. A plant produces 300 units of equipment a month of Php 3,600 each. A unit sells for Php 4,800. The company has 10,000 shares of stock at Php 200 par value whose annual dividend is 20%. The fixed cost of production is Php 120,000 a month. a) What is the break-even point? b) What is the unhealthy point? c) What is the profit if production is 60% of capacity? (Specify if it is a gain or loss)Describe in detail why a project with a Present Worth (PW) equal to or greater than zero is economically justifiable
- A small Queensland farming company is contemplating whether to invest in a new irrigation system for their farmland. Currently their crop yields 45 tonnes that can be sold at $950 per tonne. The investment is projected to boost crop yields by 10% per year for a decade. The irrigation project entails an initial investment of $100,000 and requires an annual maintenance cost of $20,000 per year. The company has already spent $50,000 on a previous project that was unsuccessful. Assume a discount rate of 4% and a tax rate of 30%. a) Find the Market Perspective result. NPV = $ IRR = % Show your calculations in your spreadsheet.The company uses a 10% discount rate and the total-cost approach to capital budgeting analysis. The working capital required under the new system would be released for use elsewhere at the conclusion of the project. Both alternatives are expected to have a useful life of ten years.1. The net present value of the overhaul alternative (rounded to the nearest hundred pesos) is: P(750,300) P(987,400) P(725,800) P(975,800) 2. The net present value of the new system alternative (rounded to the nearest hundred pesos) is: P(552,900) P(758,400) P(862,900) P(987,400)An investment of P 250,000 can be made in a project that will produce a uniform annual revenue of P 192,800 for 5 years and then have a salvage value of 10% of the first cost. Operation and maintenance will be P 72,000 per year. Taxes and insurance will be 4% of the first cost per year. The company expects capital to earn 20% before income taxes. Show whether or not the investment is justified economically using1. ROR method2. payout method