Question
In: Finance
Evaluate the following projects, using the Net Present Value (NPV). Assume a cost of capital of...
Evaluate the following projects, using the Net Present Value (NPV). Assume a cost of capital of 6%.
|
Project A |
Project B |
|
|
Initial Cash Outflow |
$200,000 |
$160,000 |
|
Year 1 Cash flow |
69,000 |
80,000 |
|
Year 2 Cash flow |
71,000 |
80,000 |
|
Year 3 Cash flow |
85,000 |
50,000 |
- Calculate the NPV for each project.
- Which project would you accept according to the NPV?
Solutions
jeff jeffy answered 1 year agoRelated Solutions
Net present value. Independent projects Using a 14% cost of capital, calculate the net present value...
Net present value. Independent projects Using a 14% cost of
capital, calculate the net present value for each of the
independent projects shown in the following table, and indicate
whether each is acceptable.
Project A
Project B
Project C
Project D
Project E
Initial investment
$26,000
$500,000
$170,000
$950,000
$80,000
Year
Cash inflows
1
$4,000
$100,000
$20,000
$230,000
$ 0
2
4,000
120,000
19,000
230,000
0
3
4,000
140,000
18,000
230,000
0
4
4,000
160,000
17,000
230,000
20,000
5
4,000...
Net present value. Independent projects Using a 14% cost of capital, calculate the net present value...
Net present value. Independent projects Using a 14% cost of
capital, calculate the net present value for each of the
independent projects shown in the following table, and indicate
whether each is acceptable.
Project A
Project B
Project C
Project D
Project E
Initial investment
$26,000
$500,000
$170,000
$950,000
$80,000
Year
Cash inflows
1
$4,000
$100,000
$20,000
$230,000
$ 0
2
4,000
120,000
19,000
230,000
0
3
4,000
140,000
18,000
230,000
0
4
4,000
160,000
17,000
230,000
20,000
5
4,000...
Evaluate the capital budgeting project using the traditional Net Present Value (NPV) approach and the Internal...
Evaluate the capital budgeting project using the traditional Net
Present Value (NPV) approach and the Internal Rate of Return (IRR)
criterion and present findings.
Find if this new proposal will turn out to be a good investment
for his company.
Capital budgeting and investment proposal – a new product line
of branded shirts that the committee was considering for launch.
What would be the basis for calculating the after-tax operating
cash flows for the capital project? How would you arrive...
Net present value Using a cost of capital of 11%, calculate the net present value for...
Net present value Using a cost of capital of
11%, calculate the net present value for the project
shown in the following table and indicate whether it is
acceptable,
Initial investment
(CF
0CF0)
negative 1 comma 143 comma 000−1,143,000
Year
(t)
Cash inflows
(CF Subscript
tCFt)
1
$81,000
2
$138,000
3
$193,000
4
$258,000
5
$311,000
6
$377,000
7
$270,000
8
$98,000
9
$45,000
10
$29,000
The net present value (NPV) of the project is _____$ (Round
to the nearest...
Donahue Industries Inc. wishes to evaluate three capital investment projects by using the net present value...
Donahue Industries Inc. wishes to evaluate three capital
investment projects by using the net present value method. Relevant
data related to the projects are summarized as follows:
Product Line
Expansion
Distribution
Facilities
Computer
Network
Amount to be invested
$790,052
$535,506
$310,018
Annual net cash flows:
Year 1
413,000
301,000
186,000
Year 2
384,000
271,000
128,000
Year 3
351,000
241,000
93,000
Present Value of $1 at Compound
Interest
Year
6%
10%
12%
15%
20%
1
0.943
0.909
0.893
0.870
0.833
2...
What are the payback and NPV (net present value) methods of evaluating capital projects? Which is...
What are the payback and NPV (net present value) methods of
evaluating capital projects? Which is considered the best
evaluation method, and why is one better than the other?
6b3 Green Landscaping, Inc. is using net present value (NPV) when evaluating projects. Green Landscaping’s cost...
6b3
Green Landscaping, Inc. is using net present value (NPV) when
evaluating projects. Green Landscaping’s cost of capital is 10.30
percent. What is the NPV of a project if the initial costs are
$2,106,000 and the project life is estimated as 10 years? The
project will produce the same after-tax cash inflows of $512,558
per year at the end of the year.
Round the answer to two decimal places.
Your Answer:
6c3
Find the internal rate of return (IRR) for...
The NPV (net present value) of Plan Alpha is $ (130,539) The NPV (net present value)...
The
NPV (net present value) of Plan Alpha is $
(130,539)
The
NPV (net present value) of Plan Beta is $
233,001
The
IRR (internal rate of return) of Plan Alpha is $
19.36
%.
The
IRR (internal rate of return) of Plan Beta is $
21.25
%.
Which plan, if
any, should
the company pursue?
Based on the results above, the company
should pursue
Plan Beta
because
the NPV is
positive
and
the IRR is
greater than
the
company's...
Net present value (NPV)The net present value (NPV) rule is considered one of the most...
Net present value (NPV)The net present value (NPV) rule is considered one of the most
common and preferred criteria that generally lead to good
investment decisions.Consider this case:Suppose Pheasant Pharmaceuticals is evaluating a proposed
capital budgeting project (project Beta) that will require an
initial investment of $2,225,000. The project is expected to
generate the following net cash flows:YearCash FlowYear 1$275,000Year 2$475,000Year 3$450,000Year 4$450,000Pheasant Pharmaceuticals’s weighted average cost of capital is
8%, and project Beta has the same risk as the...
All projects (A to G) are 7-year projects. NPV = Net present value. IRR = internal...
All projects (A to G) are 7-year projects. NPV = Net present
value. IRR = internal rate of return. MIRR = modified internal rate
of return. PI = profitability index.
Criteria: Project_A Project_B
Project_C Project_D
Project_E Project_F
Project_G
NPV= $137,083 $31,290 $6,016
$7,647 ($584) $12,521
$9,214
IRR= 31.80% 48.34% 12.03%
11.30% 9.94% 26.79%
37.87%
MIRR= 18.52% 23.52%...
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