Clear Display Corp. (CDC) is considering two mutually exclusive investment projects. The cost of capital for...

 

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Clear Display Corp. (CDC) is considering two mutually exclusive investment projects. The cost of capital for these projects is r. The projects' expected net cash flows are as follows: Year 123401 Project M's expected cash flow -40,000 24,000 20,000 16,000 12,000 Project N's expected cash flow -40,000 14,000 18,000 22,000 26,000 a.r 10%. Calculate each project's payback period (up to 2 decimal places). Which project should be accepted? b. r= 10%. Calculate each project's discounted payback period (up to 2 decimal places). Which project should be accepted? O c. Construct NPV profiles (Y axis NPV; X axis = r; two curves in one chart) for Projects M and N, using r = 0%, 4%, 8%. 10%, 12%, 16%, 20%, 22%. 24%, 28%, 32%, 36%, and 40%. Show calculations and an Excel chart. What is the approximate crossover rate from the chart? Hint: Can use an Excel function to save time. d. Calculate each project's IRR. Show the IRR expression or equation. If r= 10%, which project should be accepted under the IRR method?. e. If r= 10%, which project should be selected? Ifr 24%, which project should be selected? f. Calculate each project's Pl at r= 10% and r= 24%, respectively. Under the PI method, which project should be selected? - C no Clear Display Corp. (CDC) is considering two mutually exclusive investment projects. The cost of capital for these projects is r. The projects' expected net cash flows are as follows: Year 123401 Project M's expected cash flow -40,000 24,000 20,000 16,000 12,000 Project N's expected cash flow -40,000 14,000 18,000 22,000 26,000 a.r 10%. Calculate each project's payback period (up to 2 decimal places). Which project should be accepted? b. r= 10%. Calculate each project's discounted payback period (up to 2 decimal places). Which project should be accepted? O c. Construct NPV profiles (Y axis NPV; X axis = r; two curves in one chart) for Projects M and N, using r = 0%, 4%, 8%. 10%, 12%, 16%, 20%, 22%. 24%, 28%, 32%, 36%, and 40%. Show calculations and an Excel chart. What is the approximate crossover rate from the chart? Hint: Can use an Excel function to save time. d. Calculate each project's IRR. Show the IRR expression or equation. If r= 10%, which project should be accepted under the IRR method?. e. If r= 10%, which project should be selected? Ifr 24%, which project should be selected? f. Calculate each project's Pl at r= 10% and r= 24%, respectively. Under the PI method, which project should be selected? - C no

Answer rating: 100% (QA)

To solve these calculations lets go through each question step by step a Payback period The payback period is the time it takes for a project to recover its initial investment We sum the net cash flow... View the full answer