Question
In: Finance
Consider two mutually exclusive investment projects, each with MARR = 8% as shown in figure A.On...
Consider two mutually exclusive investment projects, each with MARR = 8% as shown in figure A.On the basis of the IRR criterion, which alternative would be selected? B. Determine the discounted payback period for each project.
| Project's Cash Flow | ||
| n | A | B |
| 0 | -$20,000 | -$25,000 |
| 1 | $6,000 | $10,000 |
| 2 | $2,000 | $3,000 |
| 3 | $11,000 | $8,000 |
| 4 | $4,000 | $2,000 |
| 5 | $5,000 | |
| 6 | $11,000 | |
| 7 | $2,000 | |
Solutions
jeff jeffy answered 3 years agoRelated Solutions
Consider two mutually exclusive investment projects, each with MARR = 8% as shown in figure A.On...
Consider two mutually
exclusive investment projects, each with MARR = 8% as shown in
figure
A.On the basis of the
IRR criterion, which alternative would be selected?
B. Determine the
discounted payback period for each project.
Project's Cash Flow
n
A
B
0
-$20,000
-$25,000
1
$6,000
$10,000
2
$2,000
$3,000
3
$11,000
$8,000
4
$4,000
$2,000
5
$5,000
6
$11,000
7
$2,000
Consider two mutually exclusive investment projects, each with MARR = 8% as shown in figure A.On...
Consider two mutually exclusive investment projects, each with
MARR = 8% as shown in figure
A.On the basis of the IRR criterion, which alternative would be
selected?
B. Determine the discounted payback period for each project.
Project's Cash Flow
n
A
B
0
-$20,000
-$25,000
1
$6,000
$10,000
2
$2,000
$3,000
3
$11,000
$8,000
4
$4,000
$2,000
5
$5,000
6
$11,000
7
$2,000
Q3- For two mutually exclusive projects, the cash flows are given. If MARR is 10%, which...
Q3- For two mutually exclusive projects, the cash flows are
given. If MARR is 10%, which project should we select? please show
all steps and all work
N(year)
P1
P2
0
-$3000
-$12000
1
$1350
4200
2
1800
6225
3
1500
6330
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
The Radford Company is faced with two mutually exclusive investment projects. Each costs $10,000 and each...
The Radford Company is faced with two mutually exclusive
investment projects. Each costs $10,000 and each has an expected
life of three years. Annual net cash flows from each project begin
one year after the initial investment is made and have the
following probability distribution.
Project A: Probability .3 .5 .2 Cash Flows 5,000 6,000 7,000
Project B: Probability .25 .6 .15 Cash Flows 2,000 5,000
8,000
The Radford company evalutes project A at 10% and project B at
12%...
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...
Consider the following cash flows for two mutually exclusive capital investment projects. The required rate of...
Consider the following cash flows for two mutually exclusive
capital investment projects. The required rate of return is 16%.
Use this information for the next 3 questions. Year Project A Cash
Flow Project B Cash Flow 0 ($50,000) ($20,000) 1 15,000 6,000 2
15,000 6,000 3 15,000 6,000 4 13,500 5,400 5 13,500 5,400 6 6,750
5,400 Calculate the net present value of project A.
Answers:
a.342.28 b.1564.25 c.1245.11 d. 2709.21 e. 3802
Consider the following cash flows for two mutually exclusive capital investment projects. The required rate of...
Consider the following cash flows for two mutually exclusive
capital investment projects. The required rate of return is 15%.
Use this
Year Project A
Cash Flow Project B
Cash Flow
0 -$40,000 -$30,000
1 12,000 9,000
2 12,000 9,000
3 12,000 9,000
4 10,800
8,100
5 10,800 8,100
6 5,400
8,100
9. Which of the following statements is true concerning projects A
and B?
a) Both NPV and IRR lead to the same investment decision.
b) Due to time disparity, IRR indicates that project A should be
accepted and NPV indicates that project B...
Two mutually exclusive proposals, each with a life of 5 years, are under consideration. MARR is...
Two mutually exclusive proposals, each with a life of 5 years,
are under consideration. MARR is 12%. Each proposal has the
following cash flow profile:
EOY
NCF(A)
NCF(B)
0
-$30,000
-$42,000
1
$9,300
$12,625
2
$9,300
$12,625
3
$9,300
$12,625
4
$9,300
$12,625
5
$9,300
$12,625
Determine which alternative the decsion maker should select
using the internal rate of return method.
Note: Need to use uncremental IRR analysis to calculate exact
IRR
Please give the written answer, not the excel...
There are two mutually exclusive investment opportunities. The initial investment for both projects are $100,000. The...
There are two mutually exclusive investment opportunities. The
initial investment for both projects are $100,000. The first
investment will generate $20,000 per year in perpetuity. The second
project is expected to generate $15,000 for the first year and the
amount will grow at 2% per year after that. The first cash flow for
both investments start at the end of the first year. a. Calculate
the internal rate of return for both investments. b. Assume the
cost of capital is...
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