Suppose you are the financial manager of a firm considering the following five projects. Show formulas and work, without the use of excel or a financial calculator. Project A Project B Project C Project D Project E Initial Investment -$10,000 -$15,000 -$14,000 -$6,000 -$1,500 Year 1 $5,000 $5,000 $6,000 $4,000 $1,000 Year 2 $4,000 $5,000 $4,000 $2,000 $250 Year 3 $2,000 $5,000 $3,500 $2,000 $100 Year 4 $1,000 $5,000 $2,500 $2,000 $100 Year 5 $5,000 $2,000 $100 Year 6 $2,000 $100 Calculate the Payback Period for each project.
Suppose you are the financial manager of a firm considering the following five projects. Show formulas and work, without the use of excel or a financial calculator. Project A Project B Project C Project D Project E Initial Investment -$10,000 -$15,000 -$14,000 -$6,000 -$1,500 Year 1 $5,000 $5,000 $6,000 $4,000 $1,000 Year 2 $4,000 $5,000 $4,000 $2,000 $250 Year 3 $2,000 $5,000 $3,500 $2,000 $100 Year 4 $1,000 $5,000 $2,500 $2,000 $100 Year 5 $5,000 $2,000 $100 Year 6 $2,000 $100 Calculate the Payback Period for each project.
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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Suppose you are the
|
Project A |
Project B |
Project C |
Project D |
Project E |
|
|
Initial Investment |
-$10,000 |
-$15,000 |
-$14,000 |
-$6,000 |
-$1,500 |
|
Year 1 |
$5,000 |
$5,000 |
$6,000 |
$4,000 |
$1,000 |
|
Year 2 |
$4,000 |
$5,000 |
$4,000 |
$2,000 |
$250 |
|
Year 3 |
$2,000 |
$5,000 |
$3,500 |
$2,000 |
$100 |
|
Year 4 |
$1,000 |
$5,000 |
$2,500 |
$2,000 |
$100 |
|
Year 5 |
|
$5,000 |
$2,000 |
|
$100 |
|
Year 6 |
|
|
$2,000 |
|
$100 |
- Calculate the Payback Period for each project.
- Calculate the
NPV for each project, assuming a discount rate of 11%. - Calculate the
IRR for each project. - Which projects should the firm implement based on your analysis If the projects are mutually exclusive? What if they are independent? Write an email to your CFO explaining your rationale proving the choices based on the considerations of shareholder value. Assume there is no capital constraint and any desired projects can be funded.
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