Tesla Company uses a 12% hurdle rate for all capital expenditures. It screens investments using three evaluation techniques: the net present value, the profitability index and the internal rate of return. It has lined up four projects with the following information. Projects in thousands A B C D 400 596 496 544 Initial cash outflow Annual cash inflows Year 1 2 140 130 200 160 190 270 190 250 180 180 180 3 4 130 160 120 If Tesla Company has a capital budget of P1,500,000, what projects should be pursued base on the three criteria? Show necessary computations on your solution. (Present the projects to be accepted with the highest IRR to the least IRR (CAPITAL LETTER ONLY WITH NO SPACES PROVIDED (EX: A-B-C-D)
Tesla Company uses a 12% hurdle rate for all capital expenditures. It screens investments using three evaluation techniques: the net present value, the profitability index and the internal rate of return. It has lined up four projects with the following information. Projects in thousands A B C D 400 596 496 544 Initial cash outflow Annual cash inflows Year 1 2 140 130 200 160 190 270 190 250 180 180 180 3 4 130 160 120 If Tesla Company has a capital budget of P1,500,000, what projects should be pursued base on the three criteria? Show necessary computations on your solution. (Present the projects to be accepted with the highest IRR to the least IRR (CAPITAL LETTER ONLY WITH NO SPACES PROVIDED (EX: A-B-C-D)
Chapter10: Capital Budgeting: Decision Criteria And Real Option
Section: Chapter Questions
Problem 11P
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PRESENT THE PROJECTS TO BE ACCEPTED WITH THE HIGHEST
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