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 2 years 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...
Mr tan is considering 2 potential investment projects that have similar capital requirements: Year 0 year...
Mr tan is considering 2 potential investment projects that have
similar capital requirements:
Year 0
year 1
year 2
year 3
year 4
project A
4,000,000
1,600,000
1,800,000
2,000,000
2,100,000
Project B
4,200,000
500,000
1,700,000
1,900,000
2,000,000
For project A,the company cost of capital is 14%.For project
B,assessed as the riskier project of the two.,a risk adjusted cost
of capital of 15% is considered appropriate.
1) calculate the NPV of the 2 projects and assess the projects
using the investment...
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...
The estimated cashflows for two mutually exclusive projects are shown below. (A) Using a cost of...
The estimated cashflows for two mutually exclusive projects are
shown below.
(A) Using a cost of capital of 14%, which project should be
taken based on the NPV amounts?
(B) Calculate the IRR for both projects. Based on the
IRR amounts, which project should be taken?
(C) Why are your answer to parts A and B not the same?
(D) Using a cost of capital of 17%, which project should be
taken based on the NPV amounts?
(E) Create an NPV...
Consider the following two projects. The cost of capital for both projects is 15%. Project Year...
Consider the following two projects. The cost of capital for
both projects is 15%.
Project
Year 0
1
2
3
4
5
Alpha
-55,000
15,000
14,000
22,000
30,000
35,000
Gamma
-80,000
40,000
30,000
25,000
25,000
20,000
Calculate the IRR for each project and determine which one is
better.
Calculate the NPV for each project and determine which one is
better.
Based on profitability index method, which project is
better?
Overall, which project should be accepted assuming they are
mutually exclusive?...
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