A firm is considering the following projects, all of which are independent of one another. Available...

Transcribed Image Text:

A firm is considering the following projects, all of which are independent of one another. Available funds are limited to SR3 million only in this capital budgeting period, but future periods will have no capital budget constraints. I Project AB CD EF GH IJ KL MN Initial Capital Outlay in SAR 500,000 900,000 800,000 300,000 600,000 700,000 600,000 Total Present Value of Future Free Cash Flows in SAR 575,000 NPV RANKING PROJECT 1,044,000 900,000 590,000 900,000 NPV in SAR 75,000 2 50,000 -10,000 200,000 PI 3 1.150 CD 1.160 280,000 1.467 4 1.167 0.983 IRR 14.75% 5 12.32% 10.25% 11.25% 9.20% A. FILL the shaded areas in the table above with appropriate values and ACCEPT / REJECT decision. (5 marks) 13.00% B. ACCORDING TO NPV CRITERIA, which projects would be selected base on the capital rationing constraint above? CALCULATE THE TOTAL NPV VALUE for the selected projects according to this ranking. (3 marks) ACCEPT REJECT ACCEPT 15.15% ACCEPT 6 ACCEPT 7 IJ NPV RANKING PROJECT 2 P.I TOTAL NPV VALUE FOR SELECTED SET 3 RANKING PROJECT CD OF PROJECTS ACCORDING TO NPV = SAR CRITERIA 2 C. ACCORDING TO PROFITABILITY INDEX (P.I) CRITERIA, which projects would be selected base on the capital rationing constraint above? CALCULATE THE TOTAL NPV VALUE for the selected projects according to this ranking. (3 marks) 3 4 5 CD TOTAL NPV VALUE FOR SELECTED SET OF PROJECTS ACCORDING TO P.I CRITERIA 5 SAR 6 6 7 7 IJ IJ A firm is considering the following projects, all of which are independent of one another. Available funds are limited to SR3 million only in this capital budgeting period, but future periods will have no capital budget constraints. I Project AB CD EF GH IJ KL MN Initial Capital Outlay in SAR 500,000 900,000 800,000 300,000 600,000 700,000 600,000 Total Present Value of Future Free Cash Flows in SAR 575,000 NPV RANKING PROJECT 1,044,000 900,000 590,000 900,000 NPV in SAR 75,000 2 50,000 -10,000 200,000 PI 3 1.150 CD 1.160 280,000 1.467 4 1.167 0.983 IRR 14.75% 5 12.32% 10.25% 11.25% 9.20% A. FILL the shaded areas in the table above with appropriate values and ACCEPT / REJECT decision. (5 marks) 13.00% B. ACCORDING TO NPV CRITERIA, which projects would be selected base on the capital rationing constraint above? CALCULATE THE TOTAL NPV VALUE for the selected projects according to this ranking. (3 marks) ACCEPT REJECT ACCEPT 15.15% ACCEPT 6 ACCEPT 7 IJ NPV RANKING PROJECT 2 P.I TOTAL NPV VALUE FOR SELECTED SET 3 RANKING PROJECT CD OF PROJECTS ACCORDING TO NPV = SAR CRITERIA 2 C. ACCORDING TO PROFITABILITY INDEX (P.I) CRITERIA, which projects would be selected base on the capital rationing constraint above? CALCULATE THE TOTAL NPV VALUE for the selected projects according to this ranking. (3 marks) 3 4 5 CD TOTAL NPV VALUE FOR SELECTED SET OF PROJECTS ACCORDING TO P.I CRITERIA 5 SAR 6 6 7 7 IJ IJ

Answer rating: 100% (QA)

The detailed ... View the full answer