Gardial Fisheries is considering two mutually exclusive investments. The projects' expected net cash flows are as follows:
Question:
Gardial Fisheries is considering two mutually exclusive investments. The projects' expected net cash flows are as follows:
Expected Net Cash Flows
Year Project A Project B
0.....................−$375....................−$575
1.......................−300......................190
2.......................−200......................190
3......................−100......................190
4........................600......................190
5........................600......................190
6........................926......................190
7......................−200.........................0
b. Construct NPV profiles for Projects A and B.
c. What is each project's IRR?
d. What is the crossover rate, and what is its significance?
e. What is each project's MIRR at a cost of capital of 12%? At r 18%?
f. What is the regular payback period for these two projects?
g. At a cost of capital of 12%, what is the discounted payback period for these two projects?
h. What is the profitability index for each project if the cost of capital is 12%?
Cost Of CapitalCost of capital refers to the opportunity cost of making a specific investment . Cost of capital (COC) is the rate of return that a firm must earn on its project investments to maintain its market value and attract funds. COC is the required rate of... Payback Period
Payback period method is a traditional method/ approach of capital budgeting. It is the simple and widely used quantitative method of Investment evaluation. Payback period is typically used to evaluate projects or investments before undergoing them,...
Step by Step Answer:
Given data Expected Net Cash Flows Time Project A Project B 0 375 575 1 300 190 2 200 190 3 100 ...View the full answer
Corporate Finance A Focused Approach
ISBN: 978-1305637108
6th edition
Authors: Michael C. Ehrhardt, Eugene F. Brigham
