V6 You have two mutually-exclusive projects. The first project (P1) has an initial investment of 17.2 million
Fantastic news! We've Found the answer you've been seeking!
Question:
V6
Transcribed Image Text:
You have two mutually-exclusive projects. The first project (P1) has an initial investment of 17.2 million Czech crowns (CZK), and the first year's positive cash flow of 25.4 million CZK. The second year cash flow is a positive 5.2 million CZK. The second project (P2) has an initial cash flow in year 0 of a negative 20.2 million CZK. The first year cash flow is a positive 36.2 million CZK. The second year cash flow is a negative 3.2 million CZK. MARR is 18%. (a) The Annual Equivalent Worth of the first project (P1) is: Positive (b) The Annual Equivalent Worth of the second project (P2) is: Positive (c) The cash flows for the incremental investment P2-P1 are: - for year 0, +3,000,000 CZK, - for year 1, +10,800,000 CZK, and - for year 2, -8,400,000 CZK. (d) The Annual Equivalent Worth of the incremental investment P2-P1 is: 5150000 5220000 CZK. CZK. CZK. (e) The break even interest rates for the incremental investment P2-P1 are as follows. The smaller of the two rates i*= % and the larger of the two rates i2*= spreadsheet software built-in function to find these rates, you can apply a "guess" of 20% for the first rate (i1*) and 100% for the second rate (12*). %. Please note that, if you are using the (f) The Internal Rate of Return of the incremental investment P2-P1 is: %. Please note that the "true" IRR is not one of the break-even interest rates and that only the case where PB is positive needs to be developed, so there will be no need to solve a quadratic equation here. You can refer to Lecture 22 material, including Video Example E22. (g) Based on the incremental analyses using the AEW and IRR criteria, project should be chosen. You have two mutually-exclusive projects. The first project (P1) has an initial investment of 17.2 million Czech crowns (CZK), and the first year's positive cash flow of 25.4 million CZK. The second year cash flow is a positive 5.2 million CZK. The second project (P2) has an initial cash flow in year 0 of a negative 20.2 million CZK. The first year cash flow is a positive 36.2 million CZK. The second year cash flow is a negative 3.2 million CZK. MARR is 18%. (a) The Annual Equivalent Worth of the first project (P1) is: Positive (b) The Annual Equivalent Worth of the second project (P2) is: Positive (c) The cash flows for the incremental investment P2-P1 are: - for year 0, +3,000,000 CZK, - for year 1, +10,800,000 CZK, and - for year 2, -8,400,000 CZK. (d) The Annual Equivalent Worth of the incremental investment P2-P1 is: 5150000 5220000 CZK. CZK. CZK. (e) The break even interest rates for the incremental investment P2-P1 are as follows. The smaller of the two rates i*= % and the larger of the two rates i2*= spreadsheet software built-in function to find these rates, you can apply a "guess" of 20% for the first rate (i1*) and 100% for the second rate (12*). %. Please note that, if you are using the (f) The Internal Rate of Return of the incremental investment P2-P1 is: %. Please note that the "true" IRR is not one of the break-even interest rates and that only the case where PB is positive needs to be developed, so there will be no need to solve a quadratic equation here. You can refer to Lecture 22 material, including Video Example E22. (g) Based on the incremental analyses using the AEW and IRR criteria, project should be chosen.
Expert Answer:
Answer rating: 100% (QA)
SOLUTION a The Amal Equivalent Worth of the first project P1 is Amal Equi... View the full answer
Related Book For
Posted Date:
Students also viewed these finance questions
-
CoursHeroTranscribedText: A 5-year loan in the amount of $48,000 is to be repaid in equal annual payments. What is the remaining principal balance after the third payment if the interest rate is 5...
-
The following additional information is available for the Dr. Ivan and Irene Incisor family from Chapters 1-5. Ivan's grandfather died and left a portfolio of municipal bonds. In 2012, they pay Ivan...
-
Look at the following code. Which line will cause a compiler error? Explain why. Line 1 public class ClassA Line 2 { Line 3 public ClassA () {} Line 4 public final int methodl (int a) () Line 5...
-
Par Play Company, a manufacturer of driver golf clubs, started production in November 2016. For the preceding five years, Par Play had been a retailer of sports equipment. After a thorough survey of...
-
Suppose V = 0 and A = A0 sin(kx wt) y, where A0, w, and k are constants. Find E and B, and check that they satisfy Maxwell's equations in vacuum. What condition must you impose on w and k?
-
Identify the common technical requirements for a ceremonial marriage and indicate what the consequence commonly is for failure to comply with a technical requirement.
-
One reason accounting earnings might not be a realistic measure of economic income is the incentive and ability of business managers to manipulate reported profits for their own benefit. This may be...
-
On the 30th September 2023, you can already an article about a proposed merger relating to ibibi bank. On 1t October you notice that shares of ibibi bank are currently selling at rs. 1000. A)...
-
Required Edutech Ltd is an online education institution that provides online education to tertiary learners who are pursuing undergraduate degrees, certificates, and diplomas. Edutech Ltd expanded...
-
Prove that for all positive integers n and k, n >= k, nck+nCk-1 n+1Ck =
-
What is Homeland Security? When was it established? Why was it established
-
What are the implied warranties and Express warranties? Explain in detail.
-
What are the underlying molecular processes that govern the remarkable adaptability of prokaryotes to extreme environments, such as those characterized by high temperatures, acidity, or salinity?
-
Case Summary: In December 2001, Xavier Faus finds himself as one of the owners of the Arts Hotel Project in Barcelona, Spain. The 455-room hotel is managed by the Real Cortez and is in a 44-story...
-
What are the three preventive services would you offer as healthcare insurance benefits to save the most money in the long run for both patients and insurers. Support your answer with scholarly...
-
determine the cost of a product, which of the following are followed? A. first step, cost accumulation and second step, cost assignment B. first step, cost assignment and second step, cost allocation...
-
When you weigh yourself on good old terra firma (solid ground), your weight is 142 lb. In an elevator your apparent weight is 121 lb. What are the direction and magnitude of the elevator's...
-
Simplify each of the following and collect the like terms. P / 1 + 0.095 5 / 12 + 2P (1 + 0.095 171 365)
-
The assessment on a farm consists of $143,000 for the house and $467,000 for the land and buildings. A mill rate of 15.0294 applies to residences, and a rate of 4.6423 applies to agricultural land...
-
Two payments of $3000 each are due today and five years from today. The creditor has agreed to accept three equal payments due one, three, and five years from now. Assuming that money can earn 7.5%...
-
Two metallic spheres A and B are placed on nonconducting stands. Sphere A carries a positive charge, and sphere B is electrically neutral. The two spheres are connected to each other via a wire, and...
-
Two small pith balls, initially separated by a large distance, are each given a positive charge of \(5.0 \mathrm{nC}\). By how much does the electric potential energy of the two-ball system change if...
-
The negative terminal of a \(9-\mathrm{V}\) battery is connected to ground via a wire. (a) What is the potential of the negative terminal? (b) What is the potential of the positive terminal? (c) What...
Study smarter with the SolutionInn App