Problem 9-16 Problems with Profitability Index [LO1, 7]The Michner Corporation is trying to choose between the following two mutuallyexclusive design projects:Vear Cash Flow (0) Cash Flow (-2463,00032,00032,00032,000-$18,1009,7509,7509,7503a-1.If the required return is 11 percent, what is the profitability index for both projects?(Do not round intermediate calculations and round your answers to 3 decimalplaces, e.g., 32.161.)Project IProject I|a- If the company applies the profitability index decision rule, which project should the2. firm accept?O ProjectIO Project Ib- What is the NPV for both projects? (A negative answer should be indicated by a1. minus sign. Do not round Intermediate calculations and round your answers to 2decimal places, e.g., 32.16.)Project iProject Ib-if the company applies the NPV decision rule, which project should it take?2.Project IO Project I

Profitability index is the ratio of the present value of cash flow to the initial investment and…

The Michner Corporation is trying to choose between the following two mutually exclusive design projects: Year Cash Flow () Cash Flow ( -$ 63,000 32,000 32,000 32,000 -$ 18,100 9,750 9,750 9,750 3. -1.f the required return is 11 percent, what is the profitability index for both projects? (Do not round intermediate calculations and round your answers to 3 decimal places, e.g., 32.161.) Project

The Michner Corporation is trying to choose between the following two mutually exclusive design projects: Year Cash Flow () Cash Flow ( -$ 63,000 32,000 32,000 32,000 -$ 18,100 9,750 9,750 9,750 3. -1.f the required return is 11 percent, what is the profitability index for both projects? (Do not round intermediate calculations and round your answers to 3 decimal places, e.g., 32.161.) Project

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter10: Project Cash Flows And Risk

Section: Chapter Questions

Problem 17PROB

See similar textbooks

Similar questions

Problem 8-14 Problems with Profitability Index [LO 4, 6] The Michner Corporation is trying to choose between the following two mutually exclusive design projects: Year Cash Flow (I) Cash Flow (II) 0 −$ 82,000 −$ 40,000 1 32,000 13,200 2 42,000 29,500 3 48,000 22,500 a-1. If the required return is 15 percent, what is the profitability index for each project? Note: Do not round intermediate calculations and round your answers to 3 decimal places, e.g., 32.161. a-2. If the company applies the profitability index decision rule, which project should it take? b-1. If the required return is 15 percent, what is the NPV for each project? Note: Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. b-2. If the company applies the net present value decision rule, which project should it take?
9–19 Following is information about two independent projects that a company is evaluating: Capital Budgeting Technique Project X Project Y Net Present Value $5,000 $4,950 Internal rate of return 15.5% 17.0% Discounted payback period 5.1 yrs 4.6 yrs (a) Which project(s) should be chosen? Explain why. (b) What can be concluded about the company’s required rate of return, r?
Problem 8-12 Profitability Index (LO5) What is the profitability index of a project that costs $10,000 and provides cash flows of $3,000 in years 1 and 2 and $5,000 in years 3 and 4? The discount rate is 10%.
Ch 7. Decision Trees. For questions 12 and 13, please use the following information: Ang Electronics, Inc., has developed a new DVDR. If the DVDR is successful, the present value of the payoff (when the product is brought to market) is $28.6 million. If the DVDR fails, the present value of the payoff is $10.2 million. If the product goes directly to market, there is a 40 percent chance of success. Alternatively, the company can delay the launch by one year and spend $1.42 million to test market the DVDR. Test marketing would allow the firm to improve the product and increase the probability of success to 70 percent. The appropriate discount rate is 11 percent. Calculate the NPV of test marketing before going to market. Format answer as "XX,XXX,XXX.XX"
P10–24 ALL TECHNIQUES, CONFLICTING RANKINGS Nicholson Roofing Materials Inc. is considering two mutually exclusive projects that both cost $150,000. The company’s board of directors has set a maximum four-year payback requirement, the cost of capital is 9%. The project cash flows appear below. a. Calculate the payback period for each project. b. Calculate the NPV of each project at 0%. c. Calculate the NPV of each project at 9%.
5). The HC Corporation is trying to choose between the following two mutually exclusive design projects: Year Cash Flow I (in dollars) Cash Flow II (in dollars) 0 -64, 000 -18,000 1 31, 000 9,700 2 31, 000 9,700 3 31, 000 9,700 a). If the required return is 10%, and the company applies the profitability index decision rule, which project should the firm accept? Why? b). If the company applies the NPV decision rule, which project should it take? Why? c). Explain why your answers in (a) and (b) are different.
Q No 1: Project K costs $52,125, its expected net cash inflows are $12,000 per year for 8 years, and its WACC is 12 percent. What is the project's, payback, discounted payback, and profitability index?Net present value (NPV) = $7,486.6772021MIRR = 13.89% IRR = 16%DONOT SOLVE ON EXCEL
Question 25 Jefferson International is trying to choose between the flowing two mutually exclusive design projects: Year Cash Flow (A) Cash Flow (B) 0 -$79,000 -$12,500 1 18,500 5,800 2 39,600 21,800 3 48,700 25,600 The required rate of return is 9 percent. Project A has a profitability index of 1.3 and project B has a profitability index of 1.24. Which project should the firm accept and why? Choose the answer with the "best" reasoning. Group of answer choices Project A because it has a higher profitability index Project B because it has a higher profitability index Project A because it has a higher NPV Project B because it has a higher NPV Project B because it has a higher profitability index and NPV