1. There are three mutually exclusive projects X, Y and Z with the initial investment and...

 

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1. There are three mutually exclusive projects X, Y and Z with the initial investment and yearly returns as given in the table below; X (200 000) Cash outflow Cash inflows at the end of 1 Year 2 Year 3 Year 4 Year 5 Year Discount rate is 10% 70 000 50 000 80 000 40 000 30 000 a) Which project will be selected under? i. Payback period (7) ii. Net Present Value (10) Y (300 000) 40 000 50 000 60 000 90 000 140 000 Z (380 000) 150 000 120 000 105 000 75.000 50.000 b) Explain what would be the selection decision if the projects were independent of each other. (3) c) Examine the payback period as a technique for approval of projects. (5) Periods (n) 1 234567890 1234567819 10 20 Periods 12345678901234567181920 1% 0.990 2% 0.980 0.961 0.943 0.980 0.971 0.961 0.942 0.790 0.933 0.665 0.627 0.923 0.914 0.942 0.924 0.888 0.855 0.951 0.906 0.863 0.822 0.888 0.837 0.871 0.813 0.760 0.711 0.853 0.789 0.731 0.677 0.837 0.766 0.703 0.645 0.905 0.820 0.744 0.676 0.896 0.804 0.722 0.650 0.585 0.887 0.788 0.701 0.625 0.557 0.879 0.773 0.681 0.601 0.530 0.870 0.758 0.661 0.577 0.505 0.592 0.614 0.558 0.527 0.497 0.469 0.442 0.861 0.743 0.642 0.555 0.481 0.417 0.853 0.728 0.623 0.534 0.458 0.394 0.844 0.714 0.605 0.513 0.436 0.371 0.836 0.700 0.587 0.494 0.416 0.350 0.686 0.570 0.475 0.396 0.331 0.277 0.673 0.554 0.456 0.377 0.312 0.258 0.828 0.820 11% 0.901 12% 0.893 0.812 0.797 0.712 0.731 0.659 0.636 0.593 0.567 0.535 0.507 0.482 0.452 0.434 0.404 0.391 0.361 0.352 0.322 0.317 0.287 0.286 0.257 0.258 0.229 0.232 0.209 0.188 0.205 0.183 0.163 0.146 0.130 0.170 0.153 0.138 0.116 0.124 0.104 4% 3% 0.971 0.962 0.915 0.889 0.952 0.925 0.907 13% 14% 0.885 0.877 0.783 0.769 0.693 0.675 0.613 0.592 0.543 0.519 0.480 0.425 0.376 Interest rates (r) 5% 0.204 0.181 0.160 0.141 0.125 6% 7% 0.943 0.935 0.890 0.873 0.857 0.816 0.794 0.763 0.735 0.713 0.681 0.666 0.630 0.456 0.400 0.351 0.864 0.840 0.823 0.792 0.784 0.747 0.746 0705 Interest rates (r) 15% 0.870 0.756 16% 0.497 0.476 0.432 0.410 0.376 0.327 0.333 0.308 0.284 0.295 0.270 0.247 0.261 0.237 0.215 0.231 0.862 0.743 0.658 0.641 0.572 0.552 9% 8% 0.926 0.917 10% 0.909 0.842 0.826 0.772 0.751 0.544 0.508 0.195 0.208 0.187 0.168 0.182 0.163 0.145 0.160 0.141 0.125 0.108 0.140 0.123 0.123 0.107 0.093 0.708 0.650 0.596 0.623 0.583 0.547 0.582 0.540 0.502 0.500 0.460 0.463 0.422 0.475 0.429 0.388 0.444 0.397 0.356 0.415 0.368 0.326 0.388 0.340 0.299 0.362 0.315 0.339 0.292 0.317 0.270 0.296 0.250 0.212 0.275 0.252 0.231 0.232 0.194 0.215 0.178 17% 18% 0.855 0.847 0.731 0.624 0.609 0.593 0.534 0.516 0.499 19% 0.840 0.718 0.706 0.456 0.437 0.390 0.370 0.354 0.333 0.314 0.296 0.305 0.285 0.266 0.249 0.263 0.243 0.225 0.209 0.227 0.208 0.191 0.176 0.178 0.162 0.148 0.152 0.137 0.124 0.130 0.116 0.104 0.111 0.099 0.095 0.084 0.081 0.071 0.683 0.621 0.564 0.513 0.467 0.424 0.386 20% 0.833 0.694 0.579 0.482 0.419 0.402 0.352 0.335 0.279 0.233 0.108 0.093 0.080 0.069 0.060 0.052 0.111 0.095 0.081 0.069 0.059 0.051 0.044 0.098 0.083 0.070 0.060 0.051 0.043 0.087 0.073 0.061 0.051 0.037 0.043 0.037 0.031 0.350 0.319 0.290 0.263 0.239 0.218 0.198 0.180 0.164 0.149 0.194 0.162 0.135 0.112 0.093 0.088 0.078 0.079 0.065 0.062 0.054 0.045 0.038 0.031 0.026 1. There are three mutually exclusive projects X, Y and Z with the initial investment and yearly returns as given in the table below; X (200 000) Cash outflow Cash inflows at the end of 1 Year 2 Year 3 Year 4 Year 5 Year Discount rate is 10% 70 000 50 000 80 000 40 000 30 000 a) Which project will be selected under? i. Payback period (7) ii. Net Present Value (10) Y (300 000) 40 000 50 000 60 000 90 000 140 000 Z (380 000) 150 000 120 000 105 000 75.000 50.000 b) Explain what would be the selection decision if the projects were independent of each other. (3) c) Examine the payback period as a technique for approval of projects. (5) Periods (n) 1 234567890 1234567819 10 20 Periods 12345678901234567181920 1% 0.990 2% 0.980 0.961 0.943 0.980 0.971 0.961 0.942 0.790 0.933 0.665 0.627 0.923 0.914 0.942 0.924 0.888 0.855 0.951 0.906 0.863 0.822 0.888 0.837 0.871 0.813 0.760 0.711 0.853 0.789 0.731 0.677 0.837 0.766 0.703 0.645 0.905 0.820 0.744 0.676 0.896 0.804 0.722 0.650 0.585 0.887 0.788 0.701 0.625 0.557 0.879 0.773 0.681 0.601 0.530 0.870 0.758 0.661 0.577 0.505 0.592 0.614 0.558 0.527 0.497 0.469 0.442 0.861 0.743 0.642 0.555 0.481 0.417 0.853 0.728 0.623 0.534 0.458 0.394 0.844 0.714 0.605 0.513 0.436 0.371 0.836 0.700 0.587 0.494 0.416 0.350 0.686 0.570 0.475 0.396 0.331 0.277 0.673 0.554 0.456 0.377 0.312 0.258 0.828 0.820 11% 0.901 12% 0.893 0.812 0.797 0.712 0.731 0.659 0.636 0.593 0.567 0.535 0.507 0.482 0.452 0.434 0.404 0.391 0.361 0.352 0.322 0.317 0.287 0.286 0.257 0.258 0.229 0.232 0.209 0.188 0.205 0.183 0.163 0.146 0.130 0.170 0.153 0.138 0.116 0.124 0.104 4% 3% 0.971 0.962 0.915 0.889 0.952 0.925 0.907 13% 14% 0.885 0.877 0.783 0.769 0.693 0.675 0.613 0.592 0.543 0.519 0.480 0.425 0.376 Interest rates (r) 5% 0.204 0.181 0.160 0.141 0.125 6% 7% 0.943 0.935 0.890 0.873 0.857 0.816 0.794 0.763 0.735 0.713 0.681 0.666 0.630 0.456 0.400 0.351 0.864 0.840 0.823 0.792 0.784 0.747 0.746 0705 Interest rates (r) 15% 0.870 0.756 16% 0.497 0.476 0.432 0.410 0.376 0.327 0.333 0.308 0.284 0.295 0.270 0.247 0.261 0.237 0.215 0.231 0.862 0.743 0.658 0.641 0.572 0.552 9% 8% 0.926 0.917 10% 0.909 0.842 0.826 0.772 0.751 0.544 0.508 0.195 0.208 0.187 0.168 0.182 0.163 0.145 0.160 0.141 0.125 0.108 0.140 0.123 0.123 0.107 0.093 0.708 0.650 0.596 0.623 0.583 0.547 0.582 0.540 0.502 0.500 0.460 0.463 0.422 0.475 0.429 0.388 0.444 0.397 0.356 0.415 0.368 0.326 0.388 0.340 0.299 0.362 0.315 0.339 0.292 0.317 0.270 0.296 0.250 0.212 0.275 0.252 0.231 0.232 0.194 0.215 0.178 17% 18% 0.855 0.847 0.731 0.624 0.609 0.593 0.534 0.516 0.499 19% 0.840 0.718 0.706 0.456 0.437 0.390 0.370 0.354 0.333 0.314 0.296 0.305 0.285 0.266 0.249 0.263 0.243 0.225 0.209 0.227 0.208 0.191 0.176 0.178 0.162 0.148 0.152 0.137 0.124 0.130 0.116 0.104 0.111 0.099 0.095 0.084 0.081 0.071 0.683 0.621 0.564 0.513 0.467 0.424 0.386 20% 0.833 0.694 0.579 0.482 0.419 0.402 0.352 0.335 0.279 0.233 0.108 0.093 0.080 0.069 0.060 0.052 0.111 0.095 0.081 0.069 0.059 0.051 0.044 0.098 0.083 0.070 0.060 0.051 0.043 0.087 0.073 0.061 0.051 0.037 0.043 0.037 0.031 0.350 0.319 0.290 0.263 0.239 0.218 0.198 0.180 0.164 0.149 0.194 0.162 0.135 0.112 0.093 0.088 0.078 0.079 0.065 0.062 0.054 0.045 0.038 0.031 0.026

Answer rating: 100% (QA)

a i Calculate the payback period of the projects as follows ii Calculate the NPV as follows So on th... View the full answer