(a) Introduction: Net present value is calculated as the difference between present cash inflows and present cash outflows . A positive value of NPV states that the investment is profitable and negative value of NPV states that the investment will result in a loss. To explain: If S corp. is in a position to invest in the all available projects simultaneously or not.

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Answer 1

Question

Chapter 11, Problem 8E

To determine

(a)

Introduction:

Net present value is calculated as the difference between present cash inflows and present cash outflows. A positive value of NPV states that the investment is profitable and negative value of NPV states that the investment will result in a loss.

To explain:

If S corp. is in a position to invest in the all available projects simultaneously or not.

To determine

(b)

Introduction:

Profitability index is the ratio of the benefits of a project to its costs. There is a directly proportional relationship between profitability index and the attractiveness of a project.

To compute:

The profitability index for all the available projects and prioritize them accordingly for S corp.

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Answer 2

Question

Chapter 11, Problem 8E

To determine

(a)

Introduction:

Net present value is calculated as the difference between present cash inflows and present cash outflows. A positive value of NPV states that the investment is profitable and negative value of NPV states that the investment will result in a loss.

To explain:

If S corp. is in a position to invest in the all available projects simultaneously or not.

To determine

(b)

Introduction:

Profitability index is the ratio of the benefits of a project to its costs. There is a directly proportional relationship between profitability index and the attractiveness of a project.

To compute:

The profitability index for all the available projects and prioritize them accordingly for S corp.

Expert Solution & Answer

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Answer 3

Question

Chapter 11, Problem 8E

To determine

(a)

Introduction:

Net present value is calculated as the difference between present cash inflows and present cash outflows. A positive value of NPV states that the investment is profitable and negative value of NPV states that the investment will result in a loss.

To explain:

If S corp. is in a position to invest in the all available projects simultaneously or not.

To determine

(b)

Introduction:

Profitability index is the ratio of the benefits of a project to its costs. There is a directly proportional relationship between profitability index and the attractiveness of a project.

To compute:

The profitability index for all the available projects and prioritize them accordingly for S corp.

Expert Solution & Answer

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Answer 4

Question

Chapter 11, Problem 8E

To determine

(a)

Introduction:

Net present value is calculated as the difference between present cash inflows and present cash outflows. A positive value of NPV states that the investment is profitable and negative value of NPV states that the investment will result in a loss.

To explain:

If S corp. is in a position to invest in the all available projects simultaneously or not.

To determine

(b)

Introduction:

Profitability index is the ratio of the benefits of a project to its costs. There is a directly proportional relationship between profitability index and the attractiveness of a project.

To compute:

The profitability index for all the available projects and prioritize them accordingly for S corp.

Expert Solution & Answer

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Answer 5

Chapter 11, Problem 8E

To determine

(a)

Introduction:

Net present value is calculated as the difference between present cash inflows and present cash outflows. A positive value of NPV states that the investment is profitable and negative value of NPV states that the investment will result in a loss.

To explain:

If S corp. is in a position to invest in the all available projects simultaneously or not.

To determine

(b)

Introduction:

Profitability index is the ratio of the benefits of a project to its costs. There is a directly proportional relationship between profitability index and the attractiveness of a project.

To compute:

The profitability index for all the available projects and prioritize them accordingly for S corp.

Answer 6

Chapter 11, Problem 8E

To determine

(a)

Introduction:

Net present value is calculated as the difference between present cash inflows and present cash outflows. A positive value of NPV states that the investment is profitable and negative value of NPV states that the investment will result in a loss.

To explain:

If S corp. is in a position to invest in the all available projects simultaneously or not.

Answer 7

Chapter 11, Problem 8E

To determine

(a)

Introduction:

Net present value is calculated as the difference between present cash inflows and present cash outflows. A positive value of NPV states that the investment is profitable and negative value of NPV states that the investment will result in a loss.

To explain:

If S corp. is in a position to invest in the all available projects simultaneously or not.

Answer 8

To determine

(b)

Introduction:

Profitability index is the ratio of the benefits of a project to its costs. There is a directly proportional relationship between profitability index and the attractiveness of a project.

To compute:

The profitability index for all the available projects and prioritize them accordingly for S corp.

Answer 9

To determine

(b)

Introduction:

Profitability index is the ratio of the benefits of a project to its costs. There is a directly proportional relationship between profitability index and the attractiveness of a project.

To compute:

The profitability index for all the available projects and prioritize them accordingly for S corp.

Answer 10

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Answer 11

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Answer 12

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Answer 13

Ch. 11 - Prob. 1Q Ch. 11 - Prob. 2Q Ch. 11 - Prob. 3Q Ch. 11 - Which capital budgeting methods incorporate the...Ch. 11 - What is a company’s hurdle rate? How is it...Ch. 11 - How do cash flow and net income differ? Explain...Ch. 11 - In everyday terms, explain what information the...Ch. 11 - What do a positive NPV and a negative NPV indicate...Ch. 11 - Prob. 9Q Ch. 11 - Prob. 10Q

Solution Summary: The author explains that a positive value of NPV states that the investment is profitable, while negative values state that it will result in loss.

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Chapter 11 Solutions