CAT Company is considering two independent business projects; which are constructing a luxury condominium (project A)...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
CAT Company is considering two independent business projects; which are constructing a luxury condominium (project A) and building a plaza avenue (similar to J-Avenue) (project B). The financial manager of CAT Co. established that cost of capital is 8% for project A; 10% for project B. Desired payback is three years. The expected cash flows are as followings. Year Condominuium Plaza Avenue 1 -2000 800 1000 900 1200 2 3 4 5 **All numbers are in million baht. Calculate the following for each project. 12.1 12.2 12.3 12.4 -3500 700 1200 1500 1600 12.5 Payback period Discount payback period Net present value Profitability index Internal rate of return Based on the objective of shareholder wealth maximization, should CAT company accept or reject the projects? Please clearly explain. CAT Company is considering two independent business projects; which are constructing a luxury condominium (project A) and building a plaza avenue (similar to J-Avenue) (project B). The financial manager of CAT Co. established that cost of capital is 8% for project A; 10% for project B. Desired payback is three years. The expected cash flows are as followings. Year Condominuium Plaza Avenue 1 -2000 800 1000 900 1200 2 3 4 5 **All numbers are in million baht. Calculate the following for each project. 12.1 12.2 12.3 12.4 -3500 700 1200 1500 1600 12.5 Payback period Discount payback period Net present value Profitability index Internal rate of return Based on the objective of shareholder wealth maximization, should CAT company accept or reject the projects? Please clearly explain.
Expert Answer:
Answer rating: 100% (QA)
Here are the calculations and analysis for each project Project A Condominium 121 Payback period 3 y... View the full answer
Related Book For
Cornerstones of Managerial Accounting
ISBN: 978-0324660135
3rd Edition
Authors: Mowen, Hansen, Heitger
Posted Date:
Students also viewed these accounting questions
-
The president of the Martin Company is considering two alternative investments, X and Y. If each investment is carried out, there are four possible outcomes. The present value of net profit and...
-
The financial manager of a not-for-profit child care center wants to improve the monthly report to the board and has decided to include performance measures. What issues should the manager consider...
-
The financial manager of a large national firm was overheard making the following statement: We try to use as much retained earnings as possible for investment purposes because there is no explicit...
-
Derek borrows $32,311.00 to buy a car. He will make monthly payments for 6 years. The car loan has an interest rate of 6.49%. After a 13.00 months Derek decides to pay off his car loan. How much must...
-
State the most important factors affecting the sample size in confirmations of accounts receivable.
-
A project that is expected to generate annual after-tax cash flows of $2,200 for each of the next 20 years. The project's cost of capital is 8.5 percent and it has an IRR of 9.058 percent. What is...
-
This exercise considers data from the Medical Expenditure Panel Survey (MEPS) described in Exercise 1.1 and Section 11.4. Our dependent variable consists of the number of outpatient (COUNTOP) visits....
-
Walden Green provides custom farming services to owners of 5-acre wheat fields. In July, he earned $2,400 by cutting, turning, and balling 3,000 bales. In the same month, the incurred the following...
-
Ethical Finance brings Value to Society, do you think Islamic finance also brings value to society? What are the Islamic social financing channels?
-
Hoban worked for Texas Tech as a First Responder Coordinator. She was responsible for training and quality assurance for those responding to nonmedical emergencies, establishing medical protocols for...
-
The given two-parameter family is a solution of the indicated differential equation on the interval (, ). Determine whether a member of the family can be found that satisfies the boundary conditions....
-
A car with a total mass of \(1400 \mathrm{~kg}\) (including passengers) is driving down a washboard road with bumps spaced \(5.0 \mathrm{~m}\) apart. The ride is roughest-that is, the car bounces up...
-
A train whistle is heard at \(300 \mathrm{~Hz}\) as the train approaches town. The train cuts its speed in half as it nears the station, and the sound of the whistle is then \(290 \mathrm{~Hz}\)....
-
To keep from overheating, the cyclist must get rid of the excess thermal energy generated in his body. If he cycles at this rate for 2 hours, how many liters of water must he perspire, to the nearest...
-
A balloon is launched at sea level, where the air pressure is \(100 \mathrm{kPa}\). The density in the hot-air chamber is \(1.0 \mathrm{~kg} / \mathrm{m}^{3}\). What is the density of the air when...
-
Some bat species have auditory systems that work best over a narrow range of frequencies. To account for this, the bats adjust the sound frequencies they emit so that the returning, Doppler shifted...
-
Mr. A sold his family home for P5,000,000. He bought the land for P1,000,000 and introduced improvements therein for a total cost of P2,000,000. What is the amount of capital gains tax due from the...
-
Flicker, Inc., a closely held corporation, acquired a passive activity this year. Gross income from operations of the activity was $160,000. Operating expenses, not including depreciation, were...
-
All budgets depend on the sales budget. Is this true? Explain.
-
A forklift and its driver used for moving materials are examples of a. activity outputs. b. activity output measures. c. resource drivers. d. activity inputs. e. root causes.
-
How would process costing for services differ from process costing for manufactured goods?
-
When the isotope bismuth-213 emits an alpha particle, what new element results? (a) lead (b) platinum (c) polonium (d) thallium
-
Which process would release energy from goldfission or fusion? From carbon? (a) gold: fission; carbon: fusion (b) gold: fusion; carbon: fission (c) gold: fission; carbon: fission (d) gold: fusion;...
-
Which type of radiation from cosmic sources predominates on the inside of a high-flying commercial airplane? (a) alpha (b) beta (c) gamma (d)None of these predominates; all three are abundant.
Study smarter with the SolutionInn App