Ithmaar Holding B.S.C. (Bahrain Bourse, #ITHMRS) is considering two independent projects that have the following cash...

 

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Ithmaar Holding B.S.C. (Bahrain Bourse, #ITHMRS) is considering two independent projects that have the following cash flows. Year 0 1 2 3 Discount rate Project A $ 22,000 5,000 6,000 7,000 9% Project B $-60,000 15,000 25,000 35,000 10% a) If Ithmaar Holding uses the Net Present Value (NPV) method to choose between projects, which project(s) will be accepted? Why? (2 marks) b) Calculate the Internal Rate of Return (IRR) of the accepted project (2 marks) c) Calculate the Profitability Index (PI) of the accepted project (1 mark) Note: You are allowed to use Financial Calculator Ithmaar Holding B.S.C. (Bahrain Bourse, #ITHMRS) is considering two independent projects that have the following cash flows. Year 0 1 2 3 Discount rate Project A $ 22,000 5,000 6,000 7,000 9% Project B $-60,000 15,000 25,000 35,000 10% a) If Ithmaar Holding uses the Net Present Value (NPV) method to choose between projects, which project(s) will be accepted? Why? (2 marks) b) Calculate the Internal Rate of Return (IRR) of the accepted project (2 marks) c) Calculate the Profitability Index (PI) of the accepted project (1 mark) Note: You are allowed to use Financial Calculator

Answer rating: 100% (QA)

To determine which projects will be accepted using the Net Present Value NPV method we need to calcu... View the full answer