Question
In: Finance
The treasurer of Amaro Canned Fruits, Inc., has projected the cash flows of Projects A, B,...
|
The treasurer of Amaro Canned Fruits, Inc., has projected the cash flows of Projects A, B, and C as follows: |
| Year | Project A | Project B | Project C | ||||||
| 0 | −$ | 200,000 | −$ | 365,000 | −$ | 200,000 | |||
| 1 | 129,000 | 226,000 | 139,000 | ||||||
| 2 | 129,000 | 226,000 | 109,000 | ||||||
| Suppose the relevant discount rate is 8 percent per year. |
| a. |
Compute the profitability index for each of the three projects. (Do not round intermediate calculations. Round your answers to 2 decimal places, e.g., 32.16.) |
| b. |
Compute the NPV for each of the three projects. (Do not round intermediate calculations. Round your answers to 2 decimal places, e.g., 32.16.) |
| c. |
Suppose these three projects are independent. Which project(s) should Amaro accept based on the profitability index rule? |
|
| d. |
Suppose these three projects are mutually exclusive. Which project(s) should Amaro accept based on the profitability index rule? |
|
| e. |
Suppose Amaro’s budget for these projects is $565,000. The projects are not divisible. Which project(s) should Amaro accept? |
|
Solutions
jeff jeffy answered 2 years agoRelated Solutions
The treasurer of Amaro Canned Fruits, Inc., has projected the cash flows of projects A, B,...
The treasurer of Amaro Canned Fruits, Inc., has projected the
cash flows of projects A, B, and C as follows: Year Project A
Project B Project C 0 ? $ 180,000 ? $ 330,000 ? $ 180,000 1 116,000
212,000 126,000 2 116,000 212,000 96,000 Suppose the relevant
discount rate is 9 percent per year.
a. Compute the profitability index for each of the three
projects. (Do not round intermediate calculations. Round your
answers to 2 decimal places, e.g., 32.16.)...
The treasurer of Amaro Canned Fruits, Inc., has projected the cash flows of projects A, B,...
The treasurer of Amaro Canned Fruits, Inc., has projected the
cash flows of projects A, B, and C as follows:
Year
Project A
Project B
Project C
0
−
$
215,000
−
$
380,000
−
$
215,000
1
138,000
232,000
152,000
2
138,000
232,000
118,000
Suppose the relevant discount rate is 9 percent per year.
a. Compute the profitability index for each of the
three projects. (Do not round intermediate calculations.
Round your answers to 2 decimal places,...
The treasurer of Amaro Canned Fruits, INC., has projected the cash flows of projects A, B,...
The treasurer of Amaro Canned Fruits, INC., has projected the
cash flows of projects A, B, and C as follows
Year
Project A
Project B
Project C
1
-100,000
-200,000
-150,000
2
60,000
130,000
110,000
3
60,000
130,000
110,000
Suppose the cost of capital is 10
percent and Amaro’s budget for these projects is $ 300,000. The
projects are not divisible. Which project(s) should Amaro
accept?
The treasurer of Amaro Canned Fruits, Inc., has projected the cash flows of Projects A, B,...
The treasurer of Amaro Canned Fruits, Inc., has projected the
cash flows of Projects A, B, and C as follows:
Year
Project A
Project B
Project C
0
−$
205,000
−$
370,000
−$
205,000
1
132,000
228,000
142,000
2
132,000
228,000
112,000
Suppose the relevant discount rate is 7 percent per year.
a.
Compute the profitability index for each of the three projects.
(Do not round intermediate calculations. Round your answers
to 2 decimal places, e.g., 32.16.)...
The treasurer of Amaro Canned Fruits, Inc., has projected the cash flows of projects A, B,...
The treasurer of Amaro Canned Fruits, Inc., has projected the
cash flows of projects A, B, and C as follows:
Year
Project A
Project B
Project C
0
−
$
200,000
−
$
365,000
−
$
200,000
1
129,000
226,000
139,000
2
129,000
226,000
109,000
Suppose the relevant discount rate is 8 percent per year.
a. Compute the profitability index for each of the
three projects. (Do not round intermediate calculations.
Round your answers to 2 decimal places,...
Interstate Appliance Inc. is considering the following two mutually exclusive projects. Projected cash flows for these...
Interstate Appliance Inc. is considering the following two
mutually exclusive projects. Projected cash flows for these
ventures are as follows:
Plan A
IO
CF1
CF2
CF3
CF4
CF5
3,600,000
0
0
0
0
7,000,000
Plan
B
IO
CF1
CF2
CF3
CF4
CF5
3,500,000
1,000,000
0
2,000,000
2,000,000
1,000,000
If Interstate
Appliance has a 12% cost of capital, what decision should be made
regarding the projects above?
a. Accept plan A.
b. Accept plan B.
c. Reject both plans A and...
University Hospital has four capital projects under consideration with the following investments and projected cash flows....
University Hospital has four capital projects under
consideration with the following investments and projected cash
flows. What is their optimal capital budget allocation if their
corporate cost of capital is 12%?
Year
0
1
2
3
4
5
Project
A
(600,000)
50,000
90,000
150,000
200,000
250,000
B
(400,000)
80,000
100,000
100,000
100,000
100,000
C
(700,000)
100,000
220,000
250,000
250,000
250,000
D
...
22) Textiles Unlimited has gathered projected cash flows for two projects. At what interest rate would...
22) Textiles Unlimited has gathered projected cash flows for two
projects. At what interest rate would the company be indifferent
between the two projects? Year /Cash Flow A /Cash Flow B 0
/-$10,000.00 /-$5,000.00 1/ $142,200.00/ $52,600.00 2/ $34,600.00/
$139,400.00 3/ $38,700.00/ $35,500.00 A) 22.41 percent B) 19.16
percent C) 29.11 percent D) -15.14 percent E) -19.49percent
Consider the following cash flows for projects A and B. Year &
Consider the following cash flows for projects A and B.
Year Project
A Project
B
0 -$1000 -$1000
1 375 900
2 375 700
3 375 500
4 375 -200
5 -100 200
The cost of capital for both projects is 10%. What is the cross
over rate for projects A and B (the rate at which NPV profiles of
the projcets intersect each other)?
1.
There is no cross over rate as the NPV profiles of projects A
and B do not cross each other for any rate between 0% and 100%.
2....
Projects A B Cost (initial investment) 40000 250000 Year Cash flows of A Cash flows of...
Projects A B
Cost (initial investment) 40000 250000
Year Cash flows of A Cash flows of B
1 10000 40000
2 10000 120000
3 10000 200000
4 10000 200000
5 10000 200000
6 10000 200000
What are the Payback Periods of Projects A, and B? Assume all
cash flows are evenly spread throughout the year and already
discounted. If the cut-off period ( الفتره المقبوله) is three
years, which projects do you accept?
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