Question

In: Finance

Each of two mutually exclusive projects involves an investment of $124,000. Net cash flows for the...

Each of two mutually exclusive projects involves an investment of $124,000. Net cash flows for the projects are as follows:

Year

Project A

Project B

1

60,000

57,000

2

62,000

64,000

3

40,000

47,000

A.    Calculate each project's payback period. (2 Points)

B.    Compute the Net Present Value (NPV) of each project when the firm's cost of capital is 10 percent. (2 Points)

C.    Internal Rate of Return (IRR) -Your choice; based on your answer to part (B). (2 Points)

D.    Modified Internal Rate of Return (MIRR) Your choice; based on your answer to part (B). (2 Points)

Solutions

Expert Solution

Formulae


Related Solutions

Problem # 2 Each of two mutually exclusive projects involves an investment of $ 75,000.   The...
Problem # 2 Each of two mutually exclusive projects involves an investment of $ 75,000.   The cash flows for the projects are as follows:                                          Year              Project “A”                  Project "B"                                             1                      29,000                        42,000                                             2                      29,000                        42,000                                             3                      29,000                        42,000                                             4                      29,000                Note: Project "A" covers 4 years and project "B" covers 3 years.                                                         A.   Calculate each project's payback period.          1 point                             B.   Compute the IRR of each project. 1 Point
You are evaluating two mutually exclusive projects. The cash flows for each are:
You are evaluating two mutually exclusive projects.  The cash flows for each are: Project A                      Project B             Year 0               ($60,000)                      ($85,000)             Year 1               $20,000                        $22,000             Year 2               $35,000                        $25,000             Year 3               $20,000                        $30,000             Year 4               $25,000                        $25,000             Year 5                                                   $15,000             Year 6                                                   $10,000             Year 7                                                   $10,000             Year 8                                                   $10,000 Assume that, if needed, each project is repeatable with no change in cash flows.  Your cost of capital is 13%. Using the replacement chain approach, which project would you chose to...
Consider the following two mutually exclusive projects and their Cash Flows ($)
Consider the following two mutually exclusive projects and their Cash Flows ($)Project                                            C0                               C1                               C2                               C3K                                                       –$100                 +$45 +$45 +$60    W                                                     –$150                 +$45 +$45 +$125Which statement is correct based on the above information about Projects K and W?a. If the discount rate is 7.5%, accept project W because the cross-over rate is 9%b. Accept project K, because at a 9% discount rate K and W have the same net present value.c. If the discount rate is 9.5%, reject project K, because the...
Consider the cash flows from two mutually exclusive projects
Use the following information to answer the next three questions. Consider the cash flows from two mutually exclusive projects: Cash FlowYearProject AProject B0-$420,000-$420,0001$140,000$400,0002$230,000$110,0003$331,000$140,000The appropriate discount rate is 8.5%.Calculate the internal rate of return (IRR) for both projects, and determine which project should be accepted based on IRR.
Two investment projects which are mutually exclusive both require a $10,000,000 investment. Projected cash flows are:...
Two investment projects which are mutually exclusive both require a $10,000,000 investment. Projected cash flows are:                                     Year             Project A           Project B                                        1             $3,500,000        $6,500,000                                        2               3,500,000          3,000,000                                        3               3,500,000          3,000,000                                        4               3,500,000          1,000,000 If your discount rate is 12 percent, net present value each project and indicate which you would choose and why.
Flower Engineering is considering two mutually exclusive investments. The projects' expected net cash flows are as...
Flower Engineering is considering two mutually exclusive investments. The projects' expected net cash flows are as follows: Expected Net Cash Flows                                                                                                                              Time      Project A              Project B                                                                                                              0              ($400)                 ($700)                                                                                                    1              ($280)                   $201                                                                                                      2              ($200)                   $202                                                                                                      3              ($100)                   $203                                                                                                      4              $600                      $204                                                                                                      5              $600                      $205                                                                                                      6              $925                      $206                                                                                                      7              ($170)                   $207 In your report, identify which project would be selected (assuming they...
Flower Engineering is considering two mutually exclusive investments. The projects' expected net cash flows are as...
Flower Engineering is considering two mutually exclusive investments. The projects' expected net cash flows are as follows: Expected Net Cash Flows                                                                                                                              Time      Project A              Project B                                                                                                              0              ($400)                 ($700)                                                                                                    1              ($280)                   $201                                                                                                      2              ($200)                   $202                                                                                                      3              ($100)                   $203                                                                                                      4              $600                      $204                                                                                                      5              $600                      $205                                                                                                      6              $925                      $206                                                                                                      7              ($170)                   $207 In your report, identify which project would be selected (assuming they...
Flower Engineering is considering two mutually exclusive investments. The projects' expected net cash flows are as...
Flower Engineering is considering two mutually exclusive investments. The projects' expected net cash flows are as follows: Expected Net Cash Flows                                                                                                                              Time      Project A              Project B                                                                                                              0              ($400)                 ($700)                                                                                                    1              ($280)                   $201                                                                                                      2              ($200)                   $202                                                                                                      3              ($100)                   $203                                                                                                      4              $600                      $204                                                                                                      5              $600                      $205                                                                                                      6              $925                      $206                                                                                                      7              ($170)                   $207 In your report, identify which project would be selected (assuming they...
Flower Engineering is considering two mutually exclusive investments. The projects' expected net cash flows are as...
Flower Engineering is considering two mutually exclusive investments. The projects' expected net cash flows are as follows: Expected Net Cash Flows                                                                                                                              Time      Project A              Project B                                                                                                              0              ($400)                 ($700)                                                                                                    1              ($280)                   $201                                                                                                      2              ($200)                   $202                                                                                                      3              ($100)                   $203                                                                                                      4              $600                      $204                                                                                                      5              $600                      $205                                                                                                      6              $925                      $206                                                                                                      7              ($170)                   $207 In your report, identify which project would be selected (assuming they...
Flower Engineering is considering two mutually exclusive investments. The projects' expected net cash flows are as...
Flower Engineering is considering two mutually exclusive investments. The projects' expected net cash flows are as follows: Expected Net Cash Flows                                                                                                                              Time      Project A              Project B                                                                                                              0              ($400)                 ($700)                                                                                                    1              ($280)                   $201                                                                                                      2              ($200)                   $202                                                                                                      3              ($100)                   $203                                                                                                      4              $600                      $204                                                                                                      5              $600                      $205                                                                                                      6              $925                      $206                                                                                                      7              ($170)                   $207 In your report, identify which project would be selected (assuming they...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT