Question
In: Finance
2 POTENTIAL CAPITAL PROJECTS HAVE THE FOLLOWING ESTIMATED CASHFLOWS PROJECT 1 PROJECT 2 YEAR CASHFLOW CASHFLOW...
2 POTENTIAL CAPITAL PROJECTS HAVE THE FOLLOWING ESTIMATED CASHFLOWS
PROJECT 1 PROJECT 2
YEAR CASHFLOW CASHFLOW
1 $95,000 $112,000
2 $150,000 $95,000
3 $10,000 $85,000
4 $12,000 $65,000
5 $45,000 $10,000
6 $198,000 $15,000
BOTH PROJECTS HAVE A COST OF $275,000. THE COST OF CAPITAL IS 11.5%.
A) Calculate the payback period for each project. State if payback is acceptable for each project and state why.
B) Calculate the NPV for each project. State if NPV is acceptable for each project and state why.
C) Calculate the IRR for each project. State if IRR is acceptable for each project and state why.
D) Calculate the PI for each project. State if PI is acceptable for each project and state why.
Solutions
jeff jeffy answered 1 year agoRelated Solutions
2 POTENTIAL CAPITAL PROJECTS HAVE THE FOLLOWING ESTIMATED CASHFLOWS
2 POTENTIAL CAPITAL PROJECTS HAVE THE FOLLOWING ESTIMATED
CASHFLOWS
PROJECT
1
PROJECT 2
YEAR
CASHFLOW
CASHFLOW
1
$95,000
$112,000
2
$150,000
$95,000
3
$1,000
$85,000
4
$12,000
$65,000
5
$45,000
$10,000
6
$198,000
$15,000
BOTH PROJECTS HAVE A COST OF $300,000. THE COST OF CAPITAL IS
9.5%
A. CALCULATE THE PAYBACK FOR EACH PROJECT. STATE IF THE PROJECT
IS ACCEPTABLE UNDER PAYBACK AND WHY.
B. CALCULATE THE NPV FOR EACH PROJECT. STATE IF...
2 POTENTIAL CAPITAL PROJECTS HAVE THE FOLLOWING ESTIMATED CASHFLOWS
2 POTENTIAL CAPITAL PROJECTS HAVE THE FOLLOWING ESTIMATED
CASHFLOWS
PROJECT
1
PROJECT 2
YEAR
CASHFLOW
CASHFLOW
1
$95,000
$112,000
2
$150,000
$95,000
3
$1,000
$85,000
4
$12,000
$65,000
5
$45,000
$10,000
6
$198,000
$15,000
BOTH PROJECTS HAVE A COST OF $300,000. THE COST OF CAPITAL IS
9.5%
A. CALCULATE THE PAYBACK FOR EACH PROJECT. STATE IF THE PROJECT
IS ACCEPTABLE UNDER PAYBACK AND WHY.
B. CALCULATE THE NPV FOR EACH PROJECT. STATE IF...
2 POTENTIAL CAPITAL PROJECTS HAVE THE FOLLOWING ESTIMATED CASHFLOWS
2 POTENTIAL CAPITAL PROJECTS HAVE THE FOLLOWING ESTIMATED
CASHFLOWS
PROJECT
1
PROJECT 2
YEAR
CASHFLOW
CASHFLOW
1
$95,000
$112,000
2
$150,000
$95,000
3
$1,000
$85,000
4
$12,000
$65,000
5
$45,000
$10,000
6
$198,000
$15,000
BOTH PROJECTS HAVE A COST OF $300,000. THE COST OF CAPITAL IS
9.5%
A. CALCULATE THE PAYBACK FOR EACH PROJECT. STATE IF THE PROJECT
IS ACCEPTABLE UNDER PAYBACK AND WHY.
B....
2 POTENTIAL CAPITAL PROJECTS HAVE THE FOLLOWING ESTIMATED CASHFLOWS
2 POTENTIAL CAPITAL PROJECTS HAVE THE FOLLOWING ESTIMATED
CASHFLOWS
PROJECT
1 PROJECT
2
YEAR CASHFLOW CASHFLOW
1 $95,000 $112,000
2 $150,000 $95,000
3 $10,000 $85,000
4 $12,000 $65,000
5 $45,000 $10,000
6 $198,000 $
15,000
BOTH PROJECTS HAVE A COST OF $275,000. THE COST OF CAPITAL IS
11.5%
A. Calculate the payback period for each
project. State if payback is acceptable for each project
and state why.
B. Calculate the NPV for each
project. State if NPV is acceptable for each project and
state why.
C. Calculate the IRR for each
project. State if IRR is acceptable for each project and...
Consider the following two projects: Project Year 0 Cashflow Year 1 Cashflow Year 2 Cashflow Year...
Consider the following two projects:
Project Year 0 Cashflow Year 1
Cashflow Year 2 Cashflow Year 3
Cashflow Year 4 Cashflow Discount rate
A -100 40 50 60 N/A .15
B -147 50 70 90 5 .15
An incremental IRR of Project B over Project A is
_________%.
(Please round to two decimal places, write the number only
without "%". i.e. if the answer is "5%", write "5.00")
Two possible projects have beenidentified for potential selection (i.e., Project 1 or Project 2).These...
Two possible projects have been
identified for potential selection (i.e., Project 1 or Project 2).
These projects should be evaluated based on the following criteria:
Strategic fit; Probability of technical success; Financial risk;
Potential profit; Strategic leverage; and Recommendations. Using
the weighted scoring model and the information provided below,
determine which project you should pursue:The weighted project score forProject 1 was calculated to be68.25 (you should check this value to verify that
your method is correct).Using the information, evaluate the...
A capital budget project is estimated to have the following after-tax cash flows, by year: 0...
A capital budget project is estimated to have the
following after-tax cash flows, by year:
0
1
2
3
4
-$35,000
$13,000
$15,000
$17,000
$19,000
Use the information in the table above for the following
questions 11a. through 11f. The company utilizes a discount rate of
9% to evaluate capital projects. You may have rounding errors in
your calculations so choose the closest answer.
1. Find NPV, IRR, MIRR, and PI for the project shown
above
2. Find Payback and...
Harry Davis Inc is considering the following projects: Year Project 1 Project 2 Project 3 Project...
Harry Davis Inc is considering the following projects:
Year Project 1 Project 2
Project 3 Project 4
0 $(50,000,000) $(25,000,000)
$(25,000,000) $(50,000,000)
1 $15,000,000 $10,000,000
$5,000,000 $22,000,000
2 $15,000,000 $15,000,000
$10,000,000 $17,000,000
3 $15,000,000 $17,000,000
$5,000,000 $13,500,000
4 $15,000,000 $25,000,000
$11,000,000 $10,000,000
5 $15,000,000 $(35,000,000)
$10,000,000 $8,000,000
The company has a weighted average cost of capital of 11.20%
(this is the firm’s required return).
Calculate the...
You have 3 projects with the following cash flows: Year 0 1 2 3 4 Project...
You have 3 projects with the following cash flows:
Year
0
1
2
3
4
Project 1
-$ 152
$22
$39
$58
$82
Project 2
−826
0
0
7,010
−6,506
Project 3
21
41
61
80
−247
a. For which of these projects is the IRR rule reliable?
b. Estimate the IRR for each project (to the nearest1%).
c. What is the NPV of each project if the cost of capital is
5%?20 %50%?
a. For which of these...
You have 3 projects with the following cash flows: Year 0 1 2 3 4 Project...
You have 3 projects with the following cash flows:
Year
0
1
2
3
4
Project 1
−$151
$ 21
$ 39
$ 59
$ 80
Project 2
−824
00
00
6,999
−6,501
Project 3
2020
40
62
81
−245
a. For which of these projects is the IRR rule reliable?
b. Estimate the IRR for each project (to the nearest
1%).
c. What is the NPV of each project if the cost of capital is
5%?
20%?
50%?
a....
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