Question
In: Finance
Calculate the (a) net present value (NPV), (b) profitability index (PI), and (c) internal rate of...
Calculate the (a) net present value (NPV), (b) profitability index (PI), and (c) internal rate of return (IRR) for Projects 1 and 2 (cash flows shown below), assuming a required return of 13%.
|
Year |
Project 1 |
Project 2 |
|
|
0 |
-$390 |
−$420 |
|
|
1 |
$130 |
$130 |
|
|
2 |
$150 |
$140 |
|
|
3 |
$130 |
$150 |
|
|
4 |
$360 |
$310 |
a. What is the NPV of Project 1? $___ (Round to the nearest cent.) What is the NPV of Project 2? $___ (Round to the nearest cent.)
b. What is the PI of Project 1? ____ (Round to two decimal places.) What is the PI of Project 2? ___ (Round to two decimal places.)
c. What is the IRR of Project 1? __% (Round to two decimal places.) What is the IRR of Project 2? __% (Round to two decimal places.)
Solutions
jeff jeffy answered 2 years agoRelated Solutions
Calculate the (a) net present value (NPV), (b) profitability index (PI), and (c) internal rate of...
Calculate the (a) net present value (NPV), (b)
profitability index (PI), and (c) internal rate of return (IRR)
for Projects 1 and 2 (cash flows shown below), assuming a
required return of 14 %. Year 0 project 1 -440 project 2 -420 Year
1 P1 190 P2 150 Year 2 P1 120 P2 150 Year 3 P1 140 P2 190 Year 4 P1
320 P2 330
Calculate the payback period, net present value, profitability index, and internal rate of return for Project...
Calculate the payback period, net present value, profitability
index, and internal rate of return for Project A. Assume a discount
rate of 20%. Should the firm accept or reject Project A? Explain.
If the firm must choose between Project A and Project B, which is
the better choice? Explain. Under what circumstances should the
modified internal rate of return be used instead of the standard
internal rate of return?
Project A
Project B
Year
Cash Flow
Year
Cash Flow
0...
Question Calculate Pay Back Period, Net Present Value, Internal Rate of Return and Profitability Index (Benefit...
Question
Calculate Pay Back Period, Net Present Value, Internal Rate of
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these projects and decide and provide your analysis which project
is better. Critically evaluate your decision.
On January 11, 2005, the finance committee of Harding Plastic
Molding Company (HPMC) met to consider eight capital budgeting
projects. Present at the meeting were Robert L. Harding, President
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research & development. Over...
Make distinctions between the net present value (NPV) and the profitability (PI) method in the capital...
Make distinctions between the net present value (NPV) and the
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Accounting Rate of Return Payback Period Net Present Value Internal Rate of Return Profitability Index 1)...
Accounting Rate of Return Payback Period Net Present Value
Internal Rate of Return Profitability Index 1) Select three of the
analytical tools and provide supportive statements explaining how
each can be used to screen and/or rank future available projects.
2) Select one of the analytical tools listed and provide supportive
statements explaining why you believe it provides the most
important information in the decision process.
Payback period, net present value, profitability index, and internal rate of return calculations) You are considering...
Payback period, net present value, profitability index, and
internal rate of return calculations) You are considering a
project with an initial cash outlay of
$73 comma 00073,000
and expected cash flows of
$21 comma 17021,170
at the end of each year for six years. The discount rate for
this project is
9.99.9
percent.
a. What are the project's payback and discounted payback
periods?
b. What is the project's NPV?
c. What is the project's PI?
d. What is the project's...
1 (b) Compare the merits of the net present value (NPV), internal rate of return (IRR)...
1 (b) Compare the merits of the net present value (NPV),
internal rate of return (IRR) and discounted payback period methods
of capital investment project appraisal, assuming the firm’s
objective is to maximise the wealth of its equityholders. What
conditions must apply for the net present value (NPV) and internal
rate of return (IRR) methods to always give the same signal to
accept or reject a capital investment project? (210 words)
3. Understanding the IRR and NPV The net present value (NPV) and internal rate of return...
3. Understanding the IRR and NPV
The net present value (NPV) and internal rate of return (IRR)
methods of investment analysis are interrelated and are sometimes
used together to make capital budgeting decisions.
Consider the case of Cute Camel Woodcraft Company:
Last Tuesday, Cute Camel Woodcraft Company lost a portion of its
planning and financial data when both its main and its backup
servers crashed. The company’s CFO remembers that the internal rate
of return (IRR) of Project Gamma is...
3. Understanding the IRR and NPV The net present value (NPV) and internal rate of return...
3. Understanding the IRR and NPV
The net present value (NPV) and internal rate of return (IRR)
methods of investment analysis are interrelated and are sometimes
used together to make capital budgeting decisions.
Consider the case of Blue Hamster Manufacturing Inc.:
Last Tuesday, Blue Hamster Manufacturing Inc. lost a portion of
its planning and financial data when both its main and its backup
servers crashed. The company’s CFO remembers that the internal rate
of return (IRR) of Project Delta is...
3. Understanding the IRR and NPV The net present value (NPV) and internal rate of return...
3. Understanding the IRR and NPV
The net present value (NPV) and internal rate of return (IRR)
methods of investment analysis are interrelated and are sometimes
used together to make capital budgeting decisions.
Consider the case of Cold Goose Metal Works Inc.:
Last Tuesday, Cold Goose Metal Works Inc. lost a portion of its
planning and financial data when both its main and its backup
servers crashed. The company’s CFO remembers that the internal rate
of return (IRR) of Project...
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