Question
In: Economics
Petram company is considering two alternative capital budgeting projects. Project A is an investment of $300,000...
Petram company is considering two alternative capital budgeting projects. Project A is an investment of $300,000 to renovate office facilities. Project B is an investment of $600,000 to expand diagnostic capabilities. Relevant cash flow data for the two projects over their expected two-year lives are as follows:
| Year 1 | Year 2 | ||
| Pr. | Cash Flow | Pr. | Cash Flow |
| Project A | |||
| 0.18 | $ 0 | 0.08 | $ 0 |
| 0.64 | 100,000 | 0.84 | 100,000 |
| 0.18 | 200,000 | 0.08 | 200,000 |
| Project B | |||
| 0.50 | $ 0 | 0.125 | $ 0 |
| 0.50 | 400,000 | 0.75 | 200,000 |
| 0.125 | 400,000 | ||
Calculate the expected value, standard deviation, and coefficient
of variation of cash flows for each project.
Solutions
Rahul Sunny answered 1 year agoRelated Solutions
1.) A company is considering two projects. Project A Project B Initial investment $300,000 $300,000 Cash...
1.)
A company is considering two projects.
Project A Project B
Initial investment $300,000 $300,000
Cash inflow Year 1 $60,000 $90,000
Cash inflow Year 2 $60,000 $80,000
Cash inflow Year 3 $60,000 $80,000
Cash inflow Year 4 $60,000 $50,000
Cash inflow Year 5 $60,000 $70,000
What is the payback period for Project B?
Select one:
a. 2 years
b. 5 years
c. 3.5 years
d. 4 years
e. 3 years
2.)
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Please use Excel functions like PV A company is considering two capital budgeting projects. Each project...
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A company is considering two capital
budgeting projects. Each project requires an initial outlay of
$4,000,000. Cash inflows for each project are given in the table
below. Each project has a life of 3 years. The company uses the NPV
method to evaluate capital budgeting projects and its required rate
of return is 9%. Here are the cash inflows from the projects.
Project
A Project
B
Year
1
$1,900,000
0
Year
2
$1,900,000 ...
Company A is considering the following two mutually exclusive projects. Company A bases their capital budgeting...
Company A is considering the following two mutually exclusive
projects. Company A bases their capital budgeting decisions solely
on the NPV criteria. (Do not round intermediate calculations. Round
your final answer to two decimal places.)
Year
Project 1
Project 2
0
-$75,000
-$75,000
1
$50,000
$20,000
2
$30,000
$21,000
3
$15,000
$59,000
1. At what required rate of return (%) is Company A indifferent
between the two projects?
2. If the required rate of return is less than the crossover...
Capital Budgeting Question: You are considering two mutually exclusive projects for potential investment. The cash flows...
Capital Budgeting Question:
You are considering two mutually exclusive projects for
potential investment. The cash flows for the two projects are
given. For both projects, the required rate of return is 12%.
Year
Project A
Project B
0
($40,000)
($40,000)
1
$14,400
$0
2
$14,400
$0
3
$14,400
$0
4
$14,400
$70,000
Find the following:
1. The Net Present Value (NPV) .
2. The Internal Rate of Return (IRR) .
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invested today, and $105,000 that must be invested at the end of
year one. The Investment will have the following net cash inflows
at the end of each of the next three years. Year 1: $50,000; Year
2: $75,000; and Year 3: $100,000. The financial accounting net
operating income for each of the next three years is as follows:
Year 1:...
Winnebago Industries, Inc. is considering two alternative capital investment projects for future expansion: (1) expand production...
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capital investment
projects for future expansion: (1) expand production of its
motor homes, which
currently sell for $48,000 per unit, or (2) expand production of
its luxury motor
coaches, which currently sell for $85,000 per unit. If it
invests to expand
production of its motor homes, it expects to increase motor
homes annual sales
by 15,000 units at $48,000 each and reduce annual sales of
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coaches by 550 units, over the...
Winnebago Industries, Inc. is considering two alternative capital investment projects for future expansion: (1) expand production...
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capital investment
projects for future expansion: (1) expand production of its
motor homes, which
currently sell for $48,000 per unit, or (2) expand production of
its luxury motor
coaches, which currently sell for $85,000 per unit. If it
invests to expand
production of its motor homes, it expects to increase motor
homes annual sales
by 15,000 units at $48,000 each and reduce annual sales of
luxury motor
coaches by 550 units, over the...
Monty Inc. is comparing several alternative capital budgeting projects as shown below: Projects  
Monty Inc. is comparing several alternative capital budgeting
projects as shown below:
Projects
A
B
C
Initial investment
$82000
$122000
$162000
Present value of net cash
flows
92000
112000
202000
Using the profitability index, the projects rank as
C, A, B.
A, C, B.
C, B, A.
A, B, C.
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