Question
In: Finance
Two projects, Alpha and Beta, are being considered using the payback method. Each has an initial...
Two projects, Alpha and Beta, are being considered using the payback method. Each has an initial cost of $100,000. The annual cash flows for each project are listed below. a) What is the pay back period in years for Alpha? (round to two decimal places)b) What is the pay back period in years for Beta? (round to two decimal places)
| Year | Project Alpha | Project Beta | |
| 1 | 25,000 | 15,000 | |
| 2 | 25,000 | 25,000 | |
| 3 | 25,000 | 45,000 | |
| 4 | 25,000 | 30,000 | |
| 5 | 25,000 | 20,000 | |
| 6 | 25,000 | 15,000 | |
Solutions
jeff jeffy answered 2 days agoRelated Solutions
A firm has two mutually exclusive investment opportunities, Alpha and Beta. Returns on the projects are...
A firm has two mutually exclusive investment opportunities,
Alpha and Beta. Returns on the projects are as follows: Project
Alpha: returns $300 million after one year with probability 40% and
$50 million after one year with probability 60%. Project Beta
returns $180 million after one year for certain. Assume that all
investors are risk-neutral so that present values can be calculated
by discounting expected future cash flows at the risk-free interest
rate of 5% per year. Also, assume that all...
Evaluate the following projects using the payback method assuming a rule of 4 years for payback....
Evaluate the following projects using the payback method
assuming a rule of 4 years for payback.
Year Project A Project B
0. -10,000 -10,000
1. 4000 4000
2. 4000 3000
3. 4000 2000
4. 0. 1,000,000
A.
Project A can be accepted because the payback period is 2.5
years but Project B cannot be accepted because its payback period
is longer than 3 years.
B.
Project B should be accepted, since there is a $1,000,000 payoff
in the 4th year...
Evaluate the following projects using the payback method assuming a rule of 3 years for payback....
Evaluate the following projects using the payback method
assuming a rule of 3 years for payback.
Year
Project A
Project B
0
-10,000
-10,000
1
4,000
4,000
2
4,000
3,000
3
4,000
2,000
4
0
1,000,000
In the market for melons, there are two identical firms: Alpha and Beta. Each firm has...
In the market for melons, there are two identical firms: Alpha
and Beta. Each firm has a constant marginal cost of $0.28 and no
fixed cost (so the average cost is equal to marginal cost). The
demand in the market is ?=1,000−1,000∙?.
a) What is the Cournot equilibrium (output and profit)? Show
your work.
b) What is the Stackelberg equilibrium (output and profit)
(assume Alpha decides first its output)?
In the market for melons, there are two identical firms: Alpha and Beta. Each firm has...
In the market for melons, there are two identical firms: Alpha
and Beta. Each firm has a constant marginal cost of $0.28 and no
fixed cost (so the average cost is equal to marginal cost). The
demand in the market is ?=1,000−1,000∙?.
a) What is the Cournot equilibrium (output and profit)? Show
your work.
b) What is the Stackelberg equilibrium (output and profit)
(assume Alpha decides first its output)? Show your work.
Using the cash flows given in the table below for mutually exclusive projects Alpha and Beta,...
Using the cash flows given in the table below for mutually
exclusive projects Alpha and Beta, assist the Chief Financial
Officer in finding the breakeven rate (the crossover point or the
rate of indifference). Which project do you recommend if using a
cost of capital of 9% and Why?
YEAR
PROJECT ALPHA
PROJECT BETA
0
-175 000
-82 500
1
40 000
30 000
2
60 000
10 500
3
85 000
40 000
4
92 000
75 000
5...
A company has two projects: Beta and Gamma. Project Beta Project Beta is an investment in...
A company has two projects:
Beta and Gamma.
Project Beta Project Beta is an
investment in machinery. Initial investment paid was £20,000 at
the
start of the project and it has been
estimated there will be nil scrap value at the end. Cost of
capital has been estimated as 25%.
Year
Cash inflows (£)
1
4,000
2
8,000
3
14,000
4
20,000
5
18,000
Project Gamma
Project Gamma is another investment in
machinery. It has the following information:
Yearly cash...
Jack Engineering is considering two projects, Project Alpha and Project Beta system, in this year's capital...
Jack Engineering is considering two projects, Project Alpha and
Project Beta system, in this year's capital budget. The projects
are independent. The cash outlay for the Project Alpha is $44,860
and that for the Project Beta is $34,200. The firm's cost of
capital is 14%. After-tax cash flows, including depreciation, are
as follows:
Year
Project Alpha
Project Beta
1
15,000
10,200
2
15,000
10,200
3
15,000
10,200
4
15,000
10,200
5
15,000
10,200
Required:
Calculate the IRR for each project...
Jack Engineering is considering two projects, Project Alpha and Project Beta system, in this year's capital...
Jack Engineering is considering two projects, Project Alpha and
Project Beta system, in this year's capital budget. The projects
are independent. The cash outlay for the Project Alpha is $44,860
and that for the Project Beta is $34,200. The firm's cost of
capital is 14%. After-tax cash flows, including depreciation, are
as follows:
Year
Project Alpha
Project Beta
1
15,000
10,200
2
15,000
10,200
3
15,000
10,200
4
15,000
10,200
5
15,000
10,200
Required:
Calculate the IRR for each project....
Jack Engineering is considering two projects, Project Alpha and Project Beta system, in this year's capital...
Jack Engineering is considering two projects, Project Alpha and
Project Beta system, in this year's capital budget. The projects
are independent. The cash outlay for the Project Alpha is $44,860
and that for the Project Beta is $34,200. The firm's cost of
capital is 14%. After-tax cash flows, including depreciation, are
as follows:
Year
Project Alpha
Project Beta
1
15,000
10,200
2
15,000
10,200
3
15,000
10,200
4
15,000
10,200
5
15,000
10,200
Required:
Calculate the IRR for each project....
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