Answered: The Profitability Index of a project is…

The Profitability Index of a project is 1.28 and its cost of investment is 250000. The NPV of the project is O a. 65000 O b. 75000 c. 70000 O d. 80000

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 5TP: Giorgio Co. is looking at an investment project with an internal rate of return of 10.8%. The...

See similar textbooks

Related questions

Q: Suppose you have the following two investment projects with operating costs and revenues over 5…

A: ARR is the accounting rate of return i.e. ratio of average net income and average investment.…

Q: A firm has an opportunity to invest $100,000 in a project that will result revenue of $30,000 per…

A: Given: Initial investment is -$100,000 Revenue = $30,000 Maintenance = $8,000 Salvage value =…

Q: Consider the following mutually exclusive project below. Whichever project chosen, a 15 percent…

A: Capital budgeting is the process a business undertakes to evaluate potential major projects or…

Q: An investor is presented with alternative projects, A and B with the following end-of-year cash…

A: Frist we need to calculate the Net present value(NPV) of each project. NPV is the difference between…

Q: wion: The project cost of investment is ? 6,00,000 and scrap value of ? 15,000. The profits after…

A: Return per unit of investment : Under this…

Q: You have been asked to analyze two investment proposals, A and B. Project A's cost is RM80,000 and…

A: Internal rate of return or IRR is the rate at which NPV = 0 It is calculated via interpolation…

Q: A with a total investment value of Rp. 500,000,000,- The ect is 5 years old. Based on the…

A: Net present value is the difference between present value of cash flow and initial investment of the…

Q: Given the initial investment in a factory processing equipment as Ghc500,037. Let the opportunity…

A: Cash flow after tax (1-5) = 115000 Cash flow after tax (6) = 65000 Cash flow after tax (7) =…

Q: An investment of Public Transport need $ 200 billions, Revenue $ 100 billions / year, Expenditure…

A: Net Present Value The net present value calculator is a program that calculates the current value of…

Q: Suppose a project with a 6% discount rate yields R5000 for the next three years. Annual operating…

A: NPV is the first priority rule.

Q: A project has an investment cost of $200,000 and a profitability index of 1.6. What is the net…

A: Profitability index = PV of cash inflows/PV of cash outflows PV of cash inflows= 1.6 *$ 200000 = $…

Q: In the table below you have information concerning a project, (t) represents the year, () is the…

A: Net Present value (NPV) is the method used to determine current value of all future cash flows…

Q: A project requires an initial investment of $170,000 and has a project profitability index of 0.350.…

A: Profitability Ratio The Profitability Index (PI) measures the ratio between the present value of…

Q: Determine the rate of return on the total investment and the payout period if the annual profit is…

A: Payback (payout) period refers to the period within which the sum invested by the company in a…

Q: Bakasha Limited has estimated the expected Project Year 2 3 4 5 200 (500) 200 (400) 100 200 300 200…

A: Period Project A -Cash flows Project A -Cumulative Cash flows Project B -Cash flows Project B…

Q: The initial investment of a project is OMR 50,000. The profit after interest and tax (Cash inflows)…

A: Option a is correct.

Q: Given the initial investment in a factory processing equipment as Ghc500,037. Let the opportunity…

A: Given: Initial investment =Ghc 500037Cost of capital =10% p.a.After tax return (upto first 5 years)…

Q: The net present value of an investment project is $28,842 and its profitability index is . .2981 .…

Q: a. Consider the following mutually exclusive project below. Whichever project chosen, a 15 percent…

A: The discounted payback period is a capital budgeting procedure used to determine the profitability…

Q: A project is estimated to cost P120T, last 8 years & have a salvage value of P20T. The annual gross…

A: Here, Initial investment = P 120,000 Time period = 8 years Salvage value = P 20,000 Annual income =…

Q: If a $300,000 investment has a project profitability index of 0.25, what is the netpresent value of…

A: Profitability Index of a project means ratio of present value of future cash flows of the project…

Q: Determine feasibility of the project using IRR and ERR of the project. Is it acceptable? Use epsilon…

A: Capital budgeting decisions are the decisions that are to be made by a corporation for accepting or…

Q: Following is information on two alternative investment projects being considered by Tiger Company.…

A: The NPV method is used for measuring the profitability of a project by using the concept of the time…

Q: The initial investment of a project is OMR 30,000. The profit after interest and tax (Cash inflows)…

A: NPV is the sum of present value less initial investment

Q: You are assigned to calculate IRR for Sur Project with life of 8 years. You know that for the Sur…

A: Internal rate of return is one of the capital budgeting techniques. It is defined as the discount…

Q: A project with an initial cost of $29,900 is expected to provide cash flows of $9,750, $11,000,…

A: The PI index is the profitability index of the project. The shows the profitability of the project…

Q: XYZ is considering a 3-yr project. The initial outlay is -$120,000, annual cash flow is $50,000 and…

A: Calculation of Net present value (NPV):Answer:Net present value (NPV) is $4,988.13

Q: Suppose you are considering a project that will have an initial construction cost today and a final…

A: profitability index is present value of cash flow divided by initial investment.

Q: Judson's cost of capital is 12%, what is the project's NPV? Year Cash Flow in $ 0 ($1000) 1…

A: Net Present Value (NPV) is the sum of the present value of all the cash inflows and outflows.Please…

Q: Suppose a project has the following cash flows. What is the NPV if the cost of the project is…

A: NPV stands for the net present value wherein the present value of cash inflows is equal to the…

Q: The following information relates to machines A and B. Year Machine A…

A: The IRR method is used to find out the profitability of a project by calculating the return for…

Q: Consider the following two mutually exclusive projects: Year Cash Flow(A) -$ 63,000 39,000 33,000…

A: Since you have posted a question with multiple sub-parts, we will solve first four subparts for…

Q: A firm whose cost of capital is 10% is considering two mutually exclusive projects A and B, the cash…

A: Net present value refers to the capital budgeting technique that is used by the management to…

Q: An investment has an initial cost of $3.2 million. This investment will be depreciated by $900,000 a…

A: The average accounting return or average rate of return is an accounting metric which helps in…

Q: A project is estimated to cost P120T, last 8 years & have a salvage value of P20T. The annual gross…

A: Net cost is nothing but the opposite of NPV where cost of an investment exceeds the present value of…

Q: Calculate the NPV & IRR of this project, when rate of cost of capital is 15%.

A: Information Provided: Initial cash outflow = 100,000 Cash Inflows (1) = 40,000 Cash Inflows (2) =…

Q: A project has an initial cost of P52,125, expected net cash inflows of P12,000 per year for…

A: a. NPV is net present value i.e. sum of all cash flows discounted at cost of capital.

Q: You are considering a project with the following financial data: Required initial investment at n =…

A: The capital budgeting is a technique that helps to analyze the profitability of the project.

Q: An investment project has the following characteristics: Cost, P22,820; Annual cash inflows, P5,000;…

A: The time period or the number of years (NPER) refers to the time it would require for the investment…

Q: Chooanne D' Sexy invested in a four-year project and expect a rate of return of 10%. Information…

A: NPV that is net present value is the difference between the present value of cash flow and initial…

Q: If the profitability index of a project is 0.5, it means: O a. The NPV of the project is greater…

A: Profitability Index = Present Value of Future Cash FlowsInitial Investment

Q: Consider an investment project with the following net cash flows: What would be the value of X if…

A: The IRR of a project is the rate that sets the initial costs equal to the discounted future cash…

Q: a. Consider the following mutually exclusive project below. Whichever project chosen, a 15 percent…

A: Capital budgeting indicates the evaluation of the profitability of possible investments and projects…

Q: Given the initial investment in a factory processing equipment as Ghc500,037. Let the opportunity…

A: Opportunity Cost of Capital = 10% Cash Flows: Year Cash Flows 0 -500037 1 115000 2 115000…

Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

The Profitability Index of a project is 1.28 and its cost of investment is 250000. The NPV of the project is

a. 65000

O b. 75000

c. 70000

O d. 80000

Definition Definition Calculation used to evaluate the investment and financing decisions that involve cash flows occurring over multiple periods. NPV is calculated as the difference between the present value of cash inflow and cash outflow. NPV is used for capital budgeting and investment planning as well as to compare similar investment alternatives.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

Project S has a cost of $10,000 and is expected to produce benefits (cash flows) of $3,000 per year for 5 years. Project L costs $25,000 and is expected to produce cash flows of $7,400 per year for 5 years. Calculate the two projects’ NPVs, IRRs, MIRRs, and PIs, assuming a cost of capital of 12%. Which project would be selected, assuming they are mutually exclusive, using each ranking method? Which should actually be selected?
Giorgio Co. is looking at an investment project with an internal rate of return of 10.8%. The initial outlay for the investment is $90,000. The hurdle rate or minimum acceptable rate of return is 10.2%.
Dinaro Inc. is looking at an investment project that has an NPV of ($5,000). The hurdle rate is 8%.
Falkland, Inc., is considering the purchase of a patent that has a cost of $50,000 and an estimated revenue producing life of 4 years. Falkland has a cost of capital of 8%. The patent is expected to generate the following amounts of annual income and cash flows: A. What is the NPV of the investment? B. What happens if the required rate of return increases?
Mason, Inc., is considering the purchase of a patent that has a cost of $85000 and an estimated revenue producing lite of 4 years. Mason has a required rate of return that is 12% and a cost of capital of 11%. The patent is expected to generate the following amounts of annual income and cash flows: A. What is the NPV of the investment? B. What happens if the required rate of return increases?
If a $300,000 investment has a project profitability index of 0.25, what is the netpresent value of the project?a. $75,000b. $225,000c. $25,000d. $275,000
The net present value of an investment project is $28,842 and its profitability index is . .2981 . The initial investment in this project was: a $96,750. b $8,598. c $41,092. d $95,200.
A project is estimated to cost P120T, last 8 years & have a salvage value of P20T. The annual gross income is expected to average P40k & annual expenses is P6T. If capital is earning 12% determine if this a desirable investment using rate of return, what is ROR. a. 20.07% b. 21.7% c. 19.77% d. 20.77%
A project has an investment cost of $200,000 and a profitability index of 1.6. What is the net present value of the project? NPV=
Gama industry has the amount of $ 600000 for investment at MARR= 15%. The manager of this company considered three different projects with rates of return as project 1 = 24% , project 2 = 18% and project 3= 30%). these projects have initial investments as $100,000 ,$ 300000, and $200000 respectively. The overall rate of return will be: Select one: a. 0.23 b. 0.26 c. 0.45 d. 0.20
The internal rate of return (IRR) of a certain project is 11 % and the capital investment is $400,000. What is the present worth of this project at MARR = 15 % ? Note : This is not an assignment question and not a graded question... Thank you
a project with a profitability index of 1.156 also has net cash flows with a present value of $83232. the projects internal rate of return was 10%. the initial investment was a $96216 b $72000 c $74909 d $79200