Question
In: Finance
Crane Industries is expanding its product line and its production capacity. The costs and expected cash...
Crane Industries is expanding its product line and its
production capacity. The costs and expected cash flows of the two
independent projects are given in the following table. The firm
uses a discount rate of 14.08 percent for such projects.
| Year | Product Line Expansion | Production Capacity Expansion | ||||
| 0 | -$2,233,600 | -$9,704,800 | ||||
| 1 | 478,900 | 2,611,700 | ||||
| 2 | 980,500 | 2,611,700 | ||||
| 3 | 980,500 | 2,611,700 | ||||
| 4 | 980,500 | 3,361,400 | ||||
| 5 | 980,500 | 3,361,400 | ||||
a. What are the NPVs of the two projects?
(Enter negative amounts using negative sign, e.g.
-45.25. Do not round discount factors. Round other intermediate
calculations and final answer to 0 decimal places, e.g.
1,525.)
| NPV of product line expansion is | $ | |
| NPV of production capacity expansion is | $ |
b. Should both projects be accepted? or either? or neither? Explain your reasoning.
| Crane should accept
A. only the production capacity expansion B. both projects C. neither project D. only the product line expansion |
Solutions
jeff jeffy answered 2 years agoRelated Solutions
Crane Industries is expanding its product line and its production capacity. The costs and expected cash...
Crane Industries is expanding its product line and its
production capacity. The costs and expected cash flows of the two
independent projects are given in the following table. The firm
uses a discount rate of 14.08 percent for such projects.
Year
Product Line Expansion
Product capacity expansion
0
-$2,233,600
-$9,704,800
1
478,900
2,611,700
2
980,500
2,611,700
3
980,500
2,611,700
4
980,500
3,361,400
5
980,500
3,361,400
a. What are the NPVs of the two projects? (Enter negative
amounts using negative sign,...
Cullumber Industries is expanding its product line and its production capacity. The costs and expected cash...
Cullumber Industries is expanding its product line and its
production capacity. The costs and expected cash flows of the two
independent projects are given in the following table. The firm
uses a discount rate of 10.54 percent for such projects.
Year
Product Line Expansion
Production Capacity Expansion
0
-$3,146,400
-$9,369,900
1
741,600
2,699,400
2
895,900
2,699,400
3
895,900
2,699,400
4
895,900
3,978,600
5
895,900
3,978,600
a. What are the NPVs of the two projects?
(Enter negative amounts using negative sign,...
Cullumber Industries is expanding its product line and its production capacity. The costs and expected cash...
Cullumber Industries is expanding its product line and its
production capacity. The costs and expected cash flows of the two
independent projects are given in the following table. The firm
uses a discount rate of 14.98 percent for such projects.
Year
Product Line Expansion
Production Capacity Expansion
0
-$2,426,500
-$6,756,300
1
501,800
2,381,500
2
853,000
2,381,500
3
853,000
2,381,500
4
853,000
3,975,200
5
853,000
3,975,200
a. What are the NPVs of the two projects?
b. Should both projects be accepted?...
Sunland Industries is expanding its product line and its production capacity. The costs and expected cash...
Sunland Industries is expanding its product line and its
production capacity. The costs and expected cash flows of the two
independent projects are given in the following table. The firm
uses a discount rate of 16.08 percent for such projects. Year
Product Line Expansion Production Capacity Expansion 0 -$2,053,800
-$6,584,800 1 663,900 2,742,200 2 839,000 2,742,200 3 839,000
2,742,200 4 839,000 2,612,300 5 839,000 2,612,300 a. What are the
NPVs of the two projects? (Enter negative amounts using negative
sign,...
Medical Research Corporation is expanding its research and production capacity to introduce a new line of...
Medical Research Corporation is expanding its research and
production capacity to introduce a new line of products. Current
plans call for the expenditure of $100 million on four projects of
equal size ($25 million each), but different returns. Project A is
in blood clotting proteins and has an expected return of 18
percent. Project B relates to a hepatitis vaccine and carries a
potential return of 14 percent. Project C, dealing with a
cardiovascular compound, is expected to earn 11.8...
Medical Research Corporation is expanding its research and production capacity to introduce a new line of...
Medical Research Corporation is expanding its research and
production capacity to introduce a new line of products. Current
plans call for the expenditure of $100 million on four projects of
equal size ($25 million each), but different returns. Project A is
in blood clotting proteins and has an expected return of 18
percent. Project B relates to a hepatitis vaccine and carries a
potential return of 14 percent. Project C, dealing with a
cardiovascular compound, is expected to earn 11.8...
Medical Research Corporation is expanding its research and production capacity to introduce a new line of...
Medical Research Corporation is expanding its research and
production capacity to introduce a new line of products. Current
plans call for the expenditure of $100 million on four projects of
equal size ($25 million each), but different returns. Project A is
in blood clotting proteins and has an expected return of 18
percent. Project B relates to a hepatitis vaccine and carries a
potential return of 14 percent. Project C, dealing with a
cardiovascular compound, is expected to earn 11.8...
Medical Research Corporation is expanding its research and production capacity to introduce a new line of...
Medical Research Corporation is expanding its research and
production capacity to introduce a new line of products. Current
plans call for the expenditure of $100 million on four projects of
equal size ($25 million each), but different returns. Project A is
in blood clotting proteins and has an expected return of 18
percent. Project B relates to a hepatitis vaccine and carries a
potential return of 14 percent. Project C, dealing with a
cardiovascular compound, is expected to earn 11.8...
Medical Research Corporation is expanding its research and production capacity to introduce a new line of...
Medical Research
Corporation is expanding its research and production capacity to
introduce a new line of products. Current plans call for the
expenditure of $100 million on four projects of equal size ($25
million each), but different returns. Project A is in blood
clotting proteins and has an expected return of 18 percent. Project
B relates to a hepatitis vaccine and carries a potential return of
14 percent. Project C, dealing with a cardiovascular compound, is
expected to earn 11.8...
Medical Research Corporation is expanding its research and production capacity to introduce a new line of...
Medical Research Corporation is expanding its research and
production capacity to introduce a new line of products. Current
plans call for the expenditure of $100 million on four projects of
equal size ($25 million each), but different returns. Project A is
in blood clotting proteins and has an expected return of 18
percent. Project B relates to a hepatitis vaccine and carries a
potential return of 14 percent. Project C, dealing with a
cardiovascular compound, is expected to earn 11.8...
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