Question
In: Finance
Bell Manufacturing is attempting to choose the better of two mutually exclusive projects for expanding the...
Bell Manufacturing is attempting to choose the better of two mutually exclusive projects for expanding the firm's warehouse capacity. The relevant cash flows for the projects are shown in the following table: The firm's cost of capital is 16%.
|
Project X |
Project Y |
|||
| Initial investment
(CF 0CF0) |
$500,000 |
$310,000 |
||
| Year
(t) |
Cash inflows
(CF Subscript tCFt) |
|||
|
1 |
$130,000 |
$140,000 |
||
|
2 |
$130,000 |
$140,000 |
||
|
3 |
$130 comma 000130,000 |
$85 comma 00085,000 |
||
|
4 |
$180,000 |
$90,000 |
||
|
5 |
$270,000 |
$30,000 |
||
a. Calculate the IRR for each of the projects. Assess the acceptability of each project on the basis of the IRRs.
b. Which project is preferred?
Solutions
jeff jeffy answered 2 years agoRelated Solutions
Bell Manufacturing is attempting to choose the better of two mutually exclusive projects for expanding the...
Bell Manufacturing is attempting to choose the better of two
mutually exclusive projects for expanding the firm's warehouse
capacity. The relevant cash flows for the projects are shown in the
following table:
Project X
Project Y
Initial investment
(CF 0CF0)
$500,000
$310,000
Year
(t)
Cash inflows
(CF Subscript tCFt)
1
$130,000
$140,000
2
$130,000
$140,000
3
$130,000
$85,000
4
$180,000
$90,000
5
$270,000
$30,000
The firm's cost of capital is 16%.
a. Calculate the IRR for each of the projects....
Bell Manufacturing is attempting to choose the better of two mutually exclusive projects for expanding the...
Bell Manufacturing is attempting to choose the better of two
mutually exclusive projects for expanding the firm's warehouse
capacity. The relevant cash flows for the projects are shown in the
following table:
Project X
Project Y
Initial investment
(CF 0CF0)
$500,000
$310,000
Year
(t)
Cash inflows
(CF Subscript tCFt)
1
$140,000
$150,000
2
$130,000
$120,000
3
$140,000
$75,000
4
$180,000
$90,000
5
$260,000
$40,000
. The firm's cost of capital is15%.
a. Calculate the IRR for each of the projects....
IRRlMutually exclusive projects Bell Manufacturing is attempting to choose the better of two mutually exclusive projects...
IRRlMutually
exclusive projects Bell
Manufacturing is attempting to choose the better of two mutually
exclusive projects for expanding the firm'swarehouse capacity. The
relevant cash flows for the projects are shown in the following
table:
Initial
investment $500,000 $320,000
Year
1 $130,000 $130,000
2 $120,000 $120,000
3 $130,000 $105,000
4 $200,000 $90,000
5 $250,000 $40,000
The firm's cost of capital is 17%.
a. Calculate the IRR for each
of the projects. Assess the acceptability of each project on the
basis of the IRRs.
b. Which project is
preferred?
IRRlong dash—Mutually exclusive projects Bell Manufacturing is attempting to choose the better of two mutually exclusive...
IRRlong dash—Mutually
exclusive projects Bell Manufacturing is attempting to choose
the better of two mutually exclusive projects for expanding the
firm's warehouse capacity. The relevant cash flows for the projects
are shown in the following table:
LOADING...
. The firm's cost of capital is
1313 %.
a. Calculate the IRR for each of the projects. Assess the
acceptability of each project on the basis of the IRRs.
b. Which project is preferred?
Project X
Project Y
Initial investment
(CF 0CF0)...
The following two projects of equal risk are mutually exclusive alternatives for expanding the firm’s capacity....
The following two projects of equal risk are mutually exclusive
alternatives for expanding the firm’s capacity. The firm’s cost of
capital is 15%. The cash flows for each project are given in the
following table.
Year Project A Project B
0 210,000 20,000
1 15,000 12,000
2 30,000 10,500
3 32,000 9,500
4 425,000 8,200
Required:
a) Calculate each project’s payback period. Using the payback
period criterion which project is preferable? b)
Calculate the net present value for each project....
The following two projects of equal risk are mutually exclusive alternatives for expanding the firm’s capacity....
The
following two projects of equal risk are mutually exclusive
alternatives for expanding the firm’s capacity. The firm’s cost of
capital is 15%. The cash flows for each project are given in the
following table.
PROJECT A
PROJECT B
Initial investment
210,000
20,000
Year
Net cash inflows
Net cash inflows
1
15,000
12,000
2
30,000
10,500
3
32,000
9,500
4
425,000
8,200
KORONA Manufacturing is considering investing in either of two mutually exclusive projects, A and B. The...
KORONA Manufacturing is considering investing in
either of two mutually exclusive projects, A and B. The firm has a
14 percent cost of capital, and the risk-free rate is currently 9
percent. The initial investment, expected cash inflows, and
certainty equivalent factors associated with each of the projects
are shown in the following table.
Project A
Project B
Initial investment (II)
$ 40,000
$ 56,000
Year (t)
Cash inflows (CFt)
Certainty equivalent factors (αt)
Cash inflows (CFt)
Certainty equivalent factors...
The Sloan Corporation is trying to choose between the following two mutually exclusive design projects: ...
The Sloan Corporation is trying to choose between the following
two mutually exclusive design projects:
Year
Cash Flow
(I)
Cash Flow
(II)
0
–$
61,000
–$
18,300
1
28,100
9,950
2
28,100
9,950
3
28,100
9,950
a-1
If the required return is 10 percent, what is the profitability
index for both projects? (Do not round intermediate
calculations. Round your answers to 3 decimal places, e.g.,
32.161.)
Profitability
Index
Project I
Project II
a-2
If...
a firm must choose between two mutually exclusive projects, a & b. project a has an...
a
firm must choose between two mutually exclusive projects, a &
b. project a has an initial cost of $10000. its projected net cash
flows are $800, $2000, $3000, $4000, and $5000 at the end of years
1 through 5, respectively. project b has an initial cost of $14000,
and its projected net cash flows are $7000, $5000, $3000, $2000,
and $1000 at the end of years 1 through 5, respectively. the firm’s
cost of capital is 6.00%. choose the...
A firm must choose between two mutually exclusive projects, A & B. Project A has an...
A firm must choose between two mutually exclusive projects, A
& B. Project A has an initial cost of $11000. Its projected net
cash flows are $900, $2000, $3000, $4000, and $5000 at the end of
years 1 through 5, respectively. Project B has an initial cost of
$15000, and its projected net cash flows are $7000, $5000, $3000,
$2000, and $1000 at the end of years 1 through 5, respectively. At
what cost of capital would the firm be...
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