Question
In: Finance
ABC Plc is considering an investment between two mutually exclusive projects with the following annual cash...
ABC Plc is considering an investment between two mutually exclusive projects with the following annual cash flows:
ANNUAL CASH FLOWS
Year Project A Project B
0 $-50,000 $-80,000
1 30,000 40,000
2 30,000 40,000
3 30,000 40,000
4 30,000 40,000
5 30,000 40,000
ABC Plc requires a 16 percent rate of return on projects of this nature.
Required:
- Compute the NPV of both projects.
- Compute the internal rate of return on both projects.
- Compute the profitability index of both projects.
- Compute the non-discounted payback period on both projects.
- Compute the discounted payback period on both projects.
- Which of the two projects, if either, should ABC Plc accept? Why?
Solutions
jeff jeffy answered 4 months agoRelated Solutions
You are considering the following two mutually exclusive projects. The crossover rate between these two projects...
You are considering the following two mutually exclusive
projects. The crossover rate between these two projects is ___
percent and Project ___ should be accepted if the required return
is greater than the crossover rate.
Year
Project A
Project B
0
−$26,000
−$26,000
1
9,500
17,590
2
9,500
7,500
3
17,500
9,610
rev: 05_02_2019_QC_CS-167236, 05_09_2019_QC_CS-168369,
09_24_2019_QC_CS-182411
Multiple Choice
18.39%; A
11.89%; B
16.97%; B
11.89%; A
16.97%; A
You are considering the following two mutually exclusive projects. The crossover rate between these two projects...
You are considering the following two mutually exclusive
projects. The crossover rate between these two projects is ___
percent and Project ___ should be accepted if the required return
is greaterthan the crossover rate.
Year
Project A
Project B
0
−$30,000
−$30,000
1
11,500
19,630
2
11,500
9,500
3
19,500
11,650
You are considering the following two mutually exclusive projects. The crossover rate between these two projects...
You are considering
the following two mutually exclusive projects. The crossover rate
between these two projects is ___ percent and Project ___ should be
accepted if the required return is greater than the crossover
rate.
Year
Project A
Project B
0
−$24,000
−$24,000
1
8,500
16,570
2
8,500
6,500
3
16,500
8,590
Multiple Choice
12.17%; B
12.17%; A
17.82%; A
16.49%; A
16.49%; B
You are considering the following two mutually exclusive projects. The crossover rate between these two projects...
You are considering the following two mutually exclusive
projects. The crossover rate between these two projects is ___
percent and Project ___ should be accepted if the required return
is greater than the crossover rate.
Year
Project A
Project B
0
−$39,000
−$39,000
1
21,500
13,720
2
13,500
11,500
3
13,500
25,600
12.85%; B
12.52%; A
12.52%; B
12.93%; A
12.93%; B
2. The MB Company is considering investment in one of the following mutually exclusive projects. Cash...
2. The MB Company is considering investment in one of the
following mutually exclusive projects. Cash inflows of foreseeable
next 4 year are given below:
Cash inflows ($000)
Probability Project K Project L
0.15 4,250 4,250
0.20 4,750 5,250
0.30 5,250 6,250
0.20 5,750 7,250
0.15 6,250 8,250
2.a. Calculate the expected cash inflow and standard deviation
of both project.
2.b. Which project has the greater risk, in terms of variation
of coefficient and what other factors should be considered...
ABC Company is considering investing in two mutually exclusive projects, L and S. The two projects’...
ABC Company is considering investing in two mutually exclusive
projects, L and S. The two projects’ forecasted cash flows are
shown as below. WACC is 10%.
Year 0 1 2 3 4
Project L CF ($) -1,000 700 500 200 0
Project S CF ($) -1,200 100 300 800 1,000
a. Calculate the NPVs for both projects. b. Calculate the IRRs
for both projects. c. Calculate the Discounted Paybacks for both
projects. [Draw a timeline] d. Based on your...
A firm has two mutually exclusive investment projects to evaluate. The projects have the following cash...
A firm has two mutually exclusive investment projects to
evaluate. The projects have the following cash flows:
Time
Cash Flow X
Cash Flow Y
0
-$90,000
-$75,000
1
35,000
30,000
2
60,000
30,000
3
70,000
30,000
4
-
30,000
5
-
10,000
Projects X and Y are equally risky and may be repeated
indefinitely. If the firm’s WACC is 6%, what is the EAA of the
project that adds the most value to the firm? Do not round
intermediate calculations....
Jamison is considering two mutually exclusive projects with the following cash flows and the cost of...
Jamison is considering two mutually exclusive projects with the
following cash flows and the cost of capital of 10%.
Year XX YY
0 -$1,000 -$1,200
1 $800 $700
2 $800 $700
3 $700
a) Based on Annualized NPV, which project would you choose? Why
ANPV is better than NPV in this case.?
Axis Corp. is considering an investment in the best of two mutually exclusive projects.
Axis Corp. is considering an investment in the best of two
mutually exclusive projects. Project Kelvin involves an overhaul of
the existing system; it will cost $10,000 and generate cash
inflows of $10,000 per year for the next 3 years.
Project Thompson involves replacement of the existing system; it
will cost $220,000 and generate cash inflows of $50,000 per year
for 6 years. Using a(n) 10.93% cost of capital, calculate each
project's NPV, and make a recommendation based on your
findings.NPV...
Considering two mutually exclusive projects. The crossover rate between these two projects is ___ percent and...
Considering two mutually exclusive projects. The crossover rate
between these two projects is ___ percent and Project ___ should be
accepted if the required return is less than the crossover
rate.
Year
Project A
Project B
0
−$27,000
−$27,000
1
10,000
18,100
2
10,000
8,000
3
18,000
10,120
11.75%; A
11.75%; B
17.19%; B
18.64%; A
17.19%; A
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