For the following two projects, determine the Payback Period Discounted Payback Net Present Value Profitability Index...
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For the following two projects, determine the Payback Period Discounted Payback Net Present Value Profitability Index (Benefit-Cost Ratio) Internal Rate of Return. CR Modified Internal Rate of Return Project A Year 0 1 2 3 4 Net Income $5,000 $5,000 $5,000 $5,000 Cash Flow $(15,000) $6,000 $6,000 $6,000 $6,000 Project B Net Income $3,000 $5,000 $7,000 $11,000 Cash Flow $(19,000) $4,000 $6,000 $8,000 $12,000 Note that Project A is a Highest risk project while Project B is of Average risk. Assume your firm is in the 40% tax bracket, and that your cost of capital is 13%. The firm adjusts its projects with risk adjusted discount rates to account for project risks. The firm's project risk schedule is applied as follows: Risk Class Below Average Average Above Average Highest Risk Description Less than Firm Average Risk Risk equal to Firm Average Risk Higher than Normal but Not Excessive Risk Extremely High Risk RADR 11% 13% 15% 19% For the following two projects, determine the Payback Period Discounted Payback Net Present Value Profitability Index (Benefit-Cost Ratio) Internal Rate of Return. CR Modified Internal Rate of Return Project A Year 0 1 2 3 4 Net Income $5,000 $5,000 $5,000 $5,000 Cash Flow $(15,000) $6,000 $6,000 $6,000 $6,000 Project B Net Income $3,000 $5,000 $7,000 $11,000 Cash Flow $(19,000) $4,000 $6,000 $8,000 $12,000 Note that Project A is a Highest risk project while Project B is of Average risk. Assume your firm is in the 40% tax bracket, and that your cost of capital is 13%. The firm adjusts its projects with risk adjusted discount rates to account for project risks. The firm's project risk schedule is applied as follows: Risk Class Below Average Average Above Average Highest Risk Description Less than Firm Average Risk Risk equal to Firm Average Risk Higher than Normal but Not Excessive Risk Extremely High Risk RADR 11% 13% 15% 19%
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Answer rating: 100% (QA)
Answer Project A Year Cash Flow PV F at 19 PV at 19 CumPBackOrdinary PB Cum Discpayback 0 15000 1 15... View the full answer
Related Book For
Managerial Accounting
ISBN: 9780137689453
1st Edition
Authors: Jennifer Cainas, Celina J. Jozsi, Kelly Richmond Pope
Posted Date:
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