Pearson Etext For Foundations Of Finance -- Combo Access Card (10th Edition)
10th Edition
ISBN: 9780135639344
Author: Arthur J. Keown, John D Martin, J. William Petty
Publisher: PEARSON
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Chapter 10, Problem 19SP
(Discounted payback period) You are considering a project with the following
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When comparing two projects with different lives, why do you compute an annuity with an equivalent present value (PV) to the net present value (NPV)?
A. so that the projects can be compared on their cost or value created per year
B. to reduce the danger that changes in the estimate of the discount rate will lead to choosing the project with a shorter time frame
C. so that you can see which project has the greatest net present value (NPV)
D. to avoid complications arising from alternating cash inflows and outflows
O E. to ensure that cash flows from the project with a longer life that occur after the project with the shorter life has ended are considered
Assuming the appropriate interest rate is 10%, what is the MIRR for this project using the discounting approach?
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Chapter 10 Solutions
Pearson Etext For Foundations Of Finance -- Combo Access Card (10th Edition)
Ch. 10 - Why is capital budgeting such an important...Ch. 10 - What are the disadvantages of using the payback...Ch. 10 - Prob. 4RQCh. 10 - What are mutually exclusive projects? Why might...Ch. 10 - Prob. 6RQCh. 10 - When might two mutually exclusive projects having...Ch. 10 - Prob. 1SPCh. 10 - Prob. 2SPCh. 10 - Prob. 3SPCh. 10 - Prob. 4SP
Ch. 10 - (NPV, PI, and IRR calculations) Fijisawa Inc. is...Ch. 10 - (Payback period, NPV, PI, and IRR calculations)...Ch. 10 - (NPV, PI, and IRR calculations) You are...Ch. 10 - (Payback period calculations) You are considering...Ch. 10 - (NPV with varying required rates of return)...Ch. 10 - Prob. 10SPCh. 10 - (NPV with varying required rates of return) Big...Ch. 10 - (NPV with different required rates of return)...Ch. 10 - (IRR with uneven cash flows) The Tiffin Barker...Ch. 10 - (NPV calculation) Calculate the NPV given the...Ch. 10 - (NPV calculation) Calculate the NPV given the...Ch. 10 - (MIRR calculation) Calculate the MIRR given the...Ch. 10 - (PI calculation) Calculate the PI given the...Ch. 10 - (Discounted payback period) Gios Restaurants is...Ch. 10 - (Discounted payback period) You are considering a...Ch. 10 - (Discounted payback period) Assuming an...Ch. 10 - (IRR) Jella Cosmetics is considering a project...Ch. 10 - (IRR) Your investment advisor has offered you an...Ch. 10 - (IRR, payback, and calculating a missing cash...Ch. 10 - (Discounted payback period) Sheinhardt Wig Company...Ch. 10 - (IRR of uneven cash-flow stream) Microwave Oven...Ch. 10 - (MIRR) Dunder Mifflin Paper Company is considering...Ch. 10 - (MIRR calculation) Arties Wrestling Stuff is...Ch. 10 - (Capital rationing) The Cowboy Hat Company of...Ch. 10 - Prob. 29SPCh. 10 - (Size-disparity problem) The D. Dorner Farms...Ch. 10 - (Replacement chains) Destination Hotels currently...Ch. 10 - Prob. 32SPCh. 10 - Prob. 33SPCh. 10 - Why is the capital-budgeting process so important?Ch. 10 - Prob. 2MCCh. 10 - What is the payback period on each project? If...Ch. 10 - What are the criticisms of the payback period?Ch. 10 - Prob. 5MCCh. 10 - Prob. 6MCCh. 10 - Prob. 7MCCh. 10 - Prob. 8MCCh. 10 - Prob. 9MCCh. 10 - Determine the IRR for each project. Should either...Ch. 10 - How does a change in the required rate of return...Ch. 10 - Caledonia is considering two investments with...
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- Please Give Step by Step Answer Otherwise I give DISLIKES !!arrow_forwardUse the following table of free cash flows for an investment to answer questions 12-15: 2 5,000 3 3,000 Free Cash Flow -8,000 1,000 12. What is the payback period for this project? If the required payback period is 2 years, would you invest in this project based on the payback period? 13. If the discount rate is 10%, what is the discounted payback period for this project? If the required discounted payback period is 2 years, would you invest in this project based on the payback period? 14. What is the internal rate of return on this project? If the discount rate (or WACC) is 10%, would you invest in this project? 15. With a discount rate (or WACC) of 10%, what is the net present value (NPV) of this project and would you accept or reject the project?arrow_forwardSuppose a project with a 6% discount rate yields R5000 for the next three years. Annual operating costs amount to R1000 for each year, and the one time initial investment cost is R8000. a. Calculate the Net Present Value (NPV) of this project.b. Calculate the cost-benefit ratio for the project. c. Is the project acceptable? Motivate your answer.arrow_forward
- Suppose you have to choose between two mutually exclusive investment projects with the following cash flows (all numbers are in $1,000s): [image attached] Both projects have a discount rate of 9%. Determine the Payback Period, Net Present Value (NPV) and the IRR for each project. Which is the better project based on NPV? And how can you use the IRR criterion to obtain the correct (i.e., value maximizing) project choice? t=0 t = 1 t = 2 Project A -$400 $250 $300 Project B -$200 $140 $179 Skip Extension Tip: Double click to open in new tabarrow_forwardSheinhardt Wig Company is considering a project that has the cash flows: Year Project Cash Flow 0 -100,000 1 20,0000 2 60,000 3 70,000 4 50,000 5 40,0000 If the project's appropriate discount rate is 10 percent, what is the project's discounted payback period?arrow_forwardYou are evaluating a project that costs $75,000 today. The project has an inflow of $ 155,000 in one year and an outflow of $65,000 in two years. What are the IRRs for the project? What discount rate results in the maximum NPV for this project? How can you determine that this is the maximum NPV?arrow_forward
- A project has the following cash flows : Year Cash Flows 0 −$11,900 1 5,230 2 7,540 3 4,960 4 −1,600 Assuming the appropriate interest rate is 9 percent, what is the MIRR for this project using the discounting approach?arrow_forwardI need solution with explanation please,arrow_forwardIf cash flow for a project are as follows, YEAR 0 1 2 3 4 BENEFITS -100000 25000 40000 40000 50000 the discount rate is 12% find The benefit cost Ratio of the project the net benefit cost ratio of the project Should the investor invest in the projectarrow_forward
- Comparative NPV analysis. Consider the following cash flows for two different projects: Cash flow 0 1 34 4 Project A -$10 million $ 4 million $ 5 million $ 6 million $ 4 million Project B -$25 million $ 8 million $10 million $12 million $10 millionarrow_forwardA project has the following cash flows set out below. What is the profitability index of this project if the relevant discount rate is 2 percent? Enter your final answer to two decimal places. Year Cash flow 0 -1,745 1 537 2 2,066 3 3,912arrow_forwardYou are choosing between two projects. The cash flows for the projects are given in the following table ($ million): Project Year 0 Year 1 Year 2 Year 3 Year 4 A −$51 $25 $19 $19 $17 B −$98 $19 $40 $51 $60 a. What are the IRRs of the two projects? b. If your discount rate is 4.8%, what are the NPVs of the two projects? c. Why do IRR and NPV rank the two projects differently?arrow_forward
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