Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 -$...
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Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 -$ 421,000 -$ 38,000 20,000 13,700 16,600 13,400 46,000 60,000 77,000 536,000 The required return on these investments is 12 percent. a. What is the payback period for each project? Note: Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. b. What is the NPV for each project? Note: Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. c. What is the IRR for each project? 1 2 Note: Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16. d. What is the profitability index for each project? Note: Do not round intermediate calculations and round your answers to 3 decimal places, e.g., 32.161. e. Based on your answers in (a) through (d), which project will you finally choose? a. Project A Project B b. Project A Project B c. Project A Project B d. Project A Project B e. years years % % The Michner Corporation is trying to choose between the following two mutually exclusive design projects: Year Cash Flow (I) Cash Flow (II) 0 -$ 88,000 -$ 56,000 1 11,400 2 35,500 29,500 3 a-1. If the required return is 11 percent, what is the profitability index for each project? Note: Do not round intermediate calculations and round your answers to 3 decimal places, e.g., 32.161. a-2. If the company applies the profitability index decision rule, which project should it take? b-1. If the required return is 11 percent, what is the NPV for each project? Note: Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. b-2. If the company applies the net present value decision rule, which project should it take? 37,900 48,000 28,000 Answer is complete but not entirely correct. a-1. Project I 1.063 Project II 1.083 a-2. b-1. Project I Project II b-2. Project II $ $ Project I 93,575.38 60,653.01 Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 -$ 421,000 -$ 38,000 20,000 13,700 16,600 13,400 46,000 60,000 77,000 536,000 The required return on these investments is 12 percent. a. What is the payback period for each project? Note: Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. b. What is the NPV for each project? Note: Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. c. What is the IRR for each project? 1 2 Note: Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16. d. What is the profitability index for each project? Note: Do not round intermediate calculations and round your answers to 3 decimal places, e.g., 32.161. e. Based on your answers in (a) through (d), which project will you finally choose? a. Project A Project B b. Project A Project B c. Project A Project B d. Project A Project B e. years years % % The Michner Corporation is trying to choose between the following two mutually exclusive design projects: Year Cash Flow (I) Cash Flow (II) 0 -$ 88,000 -$ 56,000 1 11,400 2 35,500 29,500 3 a-1. If the required return is 11 percent, what is the profitability index for each project? Note: Do not round intermediate calculations and round your answers to 3 decimal places, e.g., 32.161. a-2. If the company applies the profitability index decision rule, which project should it take? b-1. If the required return is 11 percent, what is the NPV for each project? Note: Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. b-2. If the company applies the net present value decision rule, which project should it take? 37,900 48,000 28,000 Answer is complete but not entirely correct. a-1. Project I 1.063 Project II 1.083 a-2. b-1. Project I Project II b-2. Project II $ $ Project I 93,575.38 60,653.01
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a To calculate the payback period we need to find the point in time when the cumulative cash flow be... View the full answer
Related Book For
Foundations of Finance The Logic and Practice of Financial Management
ISBN: 978-0132994873
8th edition
Authors: Arthur J. Keown, John D. Martin, J. William Petty
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