Question
In: Finance
. Marian Ltd is considering two mutually exclusive projects with the following details: PROJECT A Initial...
. Marian Ltd is considering two mutually exclusive projects with the following details: PROJECT A Initial Investment $450,000 Scrap value in year 5 $20,000 Year 1 2 3 4 5 $000 $000 $000 $000 $000 Annual Cash Flows 200 150 100 100 100 PROJECT B Initial Investment $100,000 Scrap value in year 5 $10,000 Year 1 2 3 4 5 $000 $000 $000 $000 $000 Annual Cash Flow 50 40 30 20 20 Assume that the initial investments at the start of the project and the annual cash flow accrue evenly over the year. Require: Calculate the Net Present Value To the nearest $000 for the project A and B if the relevant cost of capital is 10%.
Solutions
jeff jeffy answered 2 years agoRelated Solutions
Marian Ltd is considering two mutually - exclusive projects with the following details: Project A Initial...
Marian Ltd is considering two mutually - exclusive projects with
the following details:
Project A Initial investment Le 450,000
Scrape value in year 5 Le 20,000 Year 1 2 3 4 5
( Le000) ( Le000 ) (Le000) (Le000) ( Le000)
Annual Cash flows 200 150 100 100 100
Project B:
Initial investment Le 100,000
Scrape value in year 5 Le10,000
Year 1 2 3 4 5
( Le000 ) ( Le000 ) ( Le000) ( Le000) ( Le000 )...
Marian Ltd is considering two mutually - exclusive projects with the following details: Project A Initial...
Marian Ltd is considering two mutually - exclusive projects with
the following details:
Project A
Initial investment Le 450,000
Scrape value in year 5 Le 20,000
Year 1 2 3 4 5
( Le000) ( Le000 ) (Le000) (Le000) ( Le000)
Annual Cash flows 200 150 100 100 100
Project B:
Initial investment Le 100,000
Scrape value in year 5 Le10,000
Year 1 2 3 4 5
( Le000 ) ( Le000 ) ( Le000) ( Le000) ( Le000 )...
Your firm is considering two projects that are mutually exclusive. Each project will require an initial...
Your firm is considering two projects that are mutually
exclusive. Each project will require an initial outlay of $200,000.
The forecast yearly cash flows are shown below. Time Project A
Project B 0 -200,000 -200,000 1 -25,000 120,000 2 80,000 80,000 3
100,000 40,000 4 140,000 25,000
a) Calculate the payback period (undiscounted) of each project.
Include fractional periods (e.g., x.xx years) in your response, if
applicable. b) Calculate the IRR of each project. c) Calculate the
Modified IRR (MIRR)...
You are considering two mutually-exclusive projects: Project A and Project B. The initial cash outlay (cost)...
You are considering two mutually-exclusive projects: Project A
and Project B. The initial cash outlay (cost) associated with
Project A is $60,000, whereas the initial cash outlay associated
with Project B is $80,000. The required rate of return for both
projects is 10%. The expected annual free cash flows from each
project are as follows:
Year
Project A
Project B
0
- 60,000
-80,000
1
13,000
15,000
2
13,000
15,000
3
13,000
15,000
4
13,000
15,000
5
13,000
15,000
6...
A company is considering two mutually exclusive projects Adept and Boffo. Project Adept requires an initial...
A company is considering two mutually exclusive projects Adept and Boffo. Project Adept requires an initial investment of $100,000 and is expected to generate after-tax cash flows of $45,000 per year for three years. Project Boffo requires an initial investment of $150,000 and is expected to generate after-tax cash flows of $50,000 per year for four years. The appropriate discount rate is 10%. What is the crossover rate for projects Adept and Boffo? 4.06% 16.65% 12.59% 7.77%
A company is considering two mutually exclusive projects. Initial investment for Project A (IRR=32%) is 15,000...
A company is considering two mutually exclusive projects.
Initial investment for Project A (IRR=32%) is 15,000 and for B
(IRR=28%) 18,000. For both projects, life time of the projects is 5
years, required rate of return for both the projects is 10%. The
net cash flows before the tax and depreciation are as given in the
table below. For both projects tax of 40% on cash inflows is to be
charged.
Year
1
2
3
4
5
Project A
7000...
You are considering the following two mutually exclusive projects. YEAR PROJECT (A) PROJECT (B) 0&
You are considering the following two mutually exclusive
projects.
YEAR
PROJECT
(A) PROJECT
(B)
0
-$35,000
-$35,000
1
22,000
13,000
2
20,000
21,000
3
13,000
22,000
What is the internal rate of return of PROJECT A?
You are considering the following two mutually exclusive projects. YEAR PROJECT (A) PROJECT (B) 0&
You are considering the following two mutually exclusive
projects.
YEAR
PROJECT
(A) PROJECT
(B)
0
-$35,000
-$35,000
1
22,000
13,000
2
20,000
21,000
3
13,000
22,000
What is the crossover point?
You are considering the following two mutually exclusive projects. The required return on each project is...
You are considering the following two mutually exclusive
projects. The required return on each project is 14 percent. Which
project should you accept and what is the best reason for that
decision?
Year
Project A
Project B
0
−$
24,000
−$
21,000
1
9,500
6,500
2
16,200
9,800
3
8,700
15,200
Project A; because it pays back faster
Project A; because it has the higher profitability index
Incorrect
Project B; because it has the higher profitability index
Project B; because...
1. There are two mutually exclusive projects. Project A requires a $600,000 initial investment and is...
1. There are two mutually exclusive projects. Project A requires
a $600,000 initial investment and is expected to provide $120,000
annual net cash inflows for 6 years. Project B requires a $740,000
initial investment and is expected to provide $200,000 annual net
cash inflows for 4 years.
Which project should you accept according to IRR method when
your cost of capital is 10%?
A. Project A
B. Project B
C. Both
D. Neither of these
2. Leveraged IRR:
A. estimates...
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