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In: Accounting
NPV and IRR, Mutually Exclusive Projects For discount factors use Exhibit 12B-1 and Exhibit 12B-2. Hunt...
NPV and IRR, Mutually Exclusive Projects
For discount factors use Exhibit 12B-1 and Exhibit 12B-2.
Hunt Inc. intends to invest in one of two competing types of computer-aided manufacturing equipment: CAM X and CAM Y. Both CAM X and CAM Y models have a project life of 10 years. The purchase price of the CAM X model is $3,600,000, and it has a net annual after-tax cash inflow of $900,000. The CAM Y model is more expensive, selling for $4,200,000, but it will produce a net annual after-tax cash inflow of $1,050,000. The cost of capital for the company is 10%.
Required:
1. Calculate the NPV for each project. Round present value calculations and your final answers to the nearest dollar.
| CAM X: | $1930113.00 |
| CAM Y: | $_________? |
Which model would you
recommend using NPV?
CAM Y
2. Select the IRR for each project.
| CAM X: 20% - 25% |
| CAM Y: 20% - 25% |
Which model would you
recommend using IRR?
Both
Solutions
Expert Solution
MINOR VARIATION MAY BE THERE IN NPV FIGURE DUE TO PV FACTOR
ekkarill92 answered 2 years agoRelated Solutions
Net Present Value and Competing Projects For discount factors use Exhibit 12B.1 and Exhibit 12B.2. Spiro...
Net Present Value and Competing Projects
For discount factors use Exhibit 12B.1 and Exhibit 12B.2.
Spiro Hospital is investigating the possibility of investing in
new dialysis equipment. Two local manufacturers of this equipment
are being considered as sources of the equipment. After-tax cash
inflows for the two competing projects are as follows:
Year
Puro Equipment
Briggs Equipment
1
$320,000
$120,000
2
280,000
120,000
3
240,000
320,000
4
160,000
400,000
5
120,000
440,000
Required:
Round present value calculations and your final...
Net Present Value and Competing Projects For discount factors use Exhibit 12B.1 and Exhibit 12B.2. Spiro...
Net Present Value and Competing Projects
For discount factors use Exhibit 12B.1 and Exhibit 12B.2.
Spiro Hospital is investigating the possibility of investing in
new dialysis equipment. Two local manufacturers of this equipment
are being considered as sources of the equipment. After-tax cash
inflows for the two competing projects are as follows:
Year
Puro Equipment
Briggs Equipment
1
$320,000
$120,000
2
280,000
120,000
3
240,000
320,000
4
160,000
400,000
5
120,000
440,000
Both projects require an initial investment of $560,000....
Net Present Value and Competing Projects For discount factors use Exhibit 12B.1 and Exhibit 12B.2. Spiro...
Net Present Value and Competing Projects For discount factors
use Exhibit 12B.1 and Exhibit 12B.2. Spiro Hospital is
investigating the possibility of investing in new dialysis
equipment. Two local manufacturers of this equipment are being
considered as sources of the equipment. After-tax cash inflows for
the two competing projects are as follows:
Year
Puro Equipment
Briggs Equipment
1
$320,000
$120,000
2
280,000
120,000
3
240,000
320,000
4
160,000
400,000
5
120,000
440,000
Both projects require an initial investment of $560,000....
Net Present Value and Competing Projects For discount factors use Exhibit 12B.1 and Exhibit 12B.2. Spiro...
Net Present Value and Competing Projects
For discount factors use Exhibit 12B.1 and Exhibit 12B.2.
Spiro Hospital is investigating the possibility of investing in
new dialysis equipment. Two local manufacturers of this equipment
are being considered as sources of the equipment. After-tax cash
inflows for the two competing projects are as follows:
Year
Puro Equipment
Briggs Equipment
1
$320,000
$120,000
2
280,000
120,000
3
240,000
320,000
4
160,000
400,000
5
120,000
440,000
Both projects require an initial investment of $560,000....
Net Present Value and Competing Projects For discount factors use Exhibit 12B.1 and Exhibit 12B.2. Spiro...
Net Present Value and Competing Projects
For discount factors use Exhibit 12B.1 and Exhibit 12B.2.
Spiro Hospital is investigating the possibility of investing in
new dialysis equipment. Two local manufacturers of this equipment
are being considered as sources of the equipment. After-tax cash
inflows for the two competing projects are as follows:
Year
Puro Equipment
Briggs Equipment
1
$320,000
$120,000
2
280,000
120,000
3
240,000
320,000
4
160,000
400,000
5
120,000
440,000
Both projects require an initial investment of $560,000....
Net Present Value For discount factors use Exhibit 12B-1 and Exhibit 12B-2. Talmage Inc. has just...
Net Present Value
For discount factors use Exhibit 12B-1 and Exhibit 12B-2.
Talmage Inc. has just completed development of a new printer.
The new product is expected to produce annual revenues of
$2,700,000. Producing the printer requires an investment in new
equipment costing $2,880,000. The printer has a projected life
cycle of 5 years. After 5 years, the equipment can be sold for
$360,000. Working capital is also expected to decrease by $360,000,
which Talmage will recover by the end...
IRR and NPV A company is analyzing two mutually exclusive projects, S and L, with the...
IRR and NPV A company is analyzing two mutually exclusive
projects, S and L, with the following cash flows: 0 1 2 3 4 Project
S -$1,000 $872.52 $260 $15 $10 Project L -$1,000 $0 $250 $380
$811.10 The company's WACC is 10.0%. What is the IRR of the better
project? (Hint: The better project may or may not be the one with
the higher IRR.) Round your answer to two decimal places.
IRR and NPV A company is analyzing two mutually exclusive projects, S and L, with the...
IRR and NPV A company is analyzing two mutually exclusive
projects, S and L, with the following cash flows: 0 1 2 3 4 Project
S -$1,000 $882.76 $260 $5 $5 Project L -$1,000 $0 $250 $400 $775.11
The company's WACC is 8.0%. What is the IRR of the better project?
(Hint: The better project may or may not be the one with the higher
IRR.) Round your answer to two decimal places. %
IRR AND NPV A company is analyzing two mutually exclusive projects, S and L, with the...
IRR AND NPV
A company is analyzing two mutually exclusive projects, S and L,
with the following cash flows:
0
1
2
3
4
Project S
-$1,000
$885.37
$250
$15
$15
Project L
-$1,000
$5
$240
$380
$844.53
The company's WACC is 8.0%. What is the IRR of the better
project? (Hint: The better project may or may not be the
one with the higher IRR.) Round your answer to two decimal
places.
IRR AND NPV A company is analyzing two mutually exclusive projects, S and L, with the...
IRR AND NPV
A company is analyzing two mutually exclusive projects, S and L,
with the following cash flows: 0 1 2 3 4 Project S -$1,000 $896.53
$250 $5 $5 Project L -$1,000 $10 $260 $380 $821.65 The company's
WACC is 10.5%. What is the IRR of the better project? (Hint: The
better project may or may not be the one with the higher IRR.)
Round your answer to two decimal places. %
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