The following are the cash flows of two projects: Year Project A Project B 0 $ (380
Question:
The following are the cash flows of two projects:
Year Project A Project B
0 $ (380 ) $ (380 )
1 210 280
2 210 280
3 210 280
4 210
If the opportunity cost of capital is 11%, what is the profitability index for each project? (Do not round intermediate calculations. Round your answers to 4 decimal places.)
Project profitability index
A
B
2) A new computer system will require an initial outlay of $14,950, but it will increase the firm's cash flows by $3,300 a year for each of the next 6 years.
a.Calculate the NPV and decide if the system is worth installing if the required rate of return is 8%. (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to 2 decimal places.)
Net Present Value
Worth Installing
b.Calculate the NPV and decide if the system is worth installing if the required rate of return is 13%. (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to 2 decimal places.)
Net Present Value
Worth Installing
c. How high can the discount rate be before you would reject the project? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.
Maximum Discount rate
3) Here are the cash flows for a project under consideration:
C0 C1 C2
$7,440 +$5,340 +$19,080
a.Calculate the project's net present value for discount rates of 0, 50%, and 100%. (Round your answers to the nearest whole dollar.)
discount rate NPV
0%
50%
100%
b. What is the IRR of the project? (Do not round intermediate calculations. Enter your answer as a whole percent.)
IRR