Question

In: Finance

Consider the following three projects; assume 14 percent cost of capital. Period Project A    Project...

  1. Consider the following three projects; assume 14 percent cost of capital.

Period Project A    Project B                   Project C

                  T=0                                               ($3,000)                     ($5,000)                     ($2,000)

                  T=1                                               $1,000                       $1,500                            $900

                  T=2                                               $1,200                      $1,500                            $900

                  T=3                                               $1,500                      $2,500                            $700

                  T=4                                               $1,500                       $2,500                            $700

                        

When you have only $5,000 to support the above projects, which project (or projects) should be chosen under the Profitability Index?

Solutions

Expert Solution

jeff jeffy answered 1 year ago
Next > < Previous

Related Solutions

Consider the following projects and assume an opportunity cost of capital of 12%.
Consider the following projects and assume an opportunity cost of capital of 12%. a. Calculate the Net Present Value (NPV) of each project. Which is to be preferred and why?(8 marks)b. If there is a capital constraint in place which limits spending to £10,000, which project or projects should be selected? Support your answer with calculations.
Consider the below estimated cash flows for Project A. Assume the cost of capital is 8%.
  Consider the below estimated cash flows for Project A. Assume the cost of capital is 8%. Year Project A 0 ($30,000) 1 $8,000 2 $9,000 3 $7,000 4 $10,000 8. Find the net present value (NPV) of Project A’s projected cash flows. a. $4,000 b. ($3,200) c. ($1,824) d. $1,754 e. ($1,969) 9. Find the Internal Rate of Return (IRR) Project A’s projected cash flows. a. 13.3%       b. 8.0%       c. 6.3%    ...
What is the NPV for the following project if its cost of capital is 15 percent...
What is the NPV for the following project if its cost of capital is 15 percent and its initial after tax cost is $5,000,000 and it is expected to provide after-tax operating cash inflows of $2,000,000 in year 1, $2,000,000 in year 2, $2,000,000 in year 3 and $1,410,000 in year 4? a. 1,700,000 b. 372622 c.-137,053 d. none of the above
Find out the NPV, IRR and Payback period for each of the following three projects. Assume...
Find out the NPV, IRR and Payback period for each of the following three projects. Assume I=6%.                                                                                                                                    (60 points) Project CF0 CF1 CF2 CF3 CF4 CF5 A -12,000 3000 3000 4000 4000 1000 B -12,000 4000 4000 3000 3000 1000 C -12,000 3000 3000 3000 3000 1000 D -12,000 5000 3000 5000 3000 0 E -12,000 3000 3000 3000 3000 5000 F -12,000 0 0 6000 6000 6000
Find out the NPV, IRR and Payback period for each of the following three projects. Assume...
Find out the NPV, IRR and Payback period for each of the following three projects. Assume I=6%. Please show work and write out answers. Do not put into a table. Thank you    Project CF0 CF1 CF2 CF3 CF4 CF5 A -12,000 3000 3000 4000 4000 1000 B -12,000 4000 4000 3000 3000 1000 C -12,000 3000 3000 3000 3000 1000 D -12,000 5000 3000 5000 3000 0 E -12,000 3000 3000 3000 3000 5000 F -12,000 0 0 6000...
Consider project S and L, and their projected cashflows. Both projects are equally risky. (Assume cost...
Consider project S and L, and their projected cashflows. Both projects are equally risky. (Assume cost of capital is 10%) Expected after-tax cash flows Expected after-tax cash flows Year(t) Project S Project L 0(today) ($1,000) ($1,000) 1 500 100 2 400 300 3 300 400 4 100 600 Required; Find the NPV of each of the projects. Calculate the B/C ratio In each case state if we should accept the project or not and explain your answer.
Consider my cost of capital is 4%. I have got three projects to choose from. A)...
Consider my cost of capital is 4%. I have got three projects to choose from. A) NPV = -49000 IRR = 5.5% B) NPV = -40000 IRR = 6% C) NPV = -55000 IRR = 5% One can observe that all NPV'sare negative but IRRwise projects are good. Kindly advise regarding how to critically evaluate the projects to choose the best one.
Calculate NPV for a project with a period of 10 years, opportunity cost is 14%. a....
Calculate NPV for a project with a period of 10 years, opportunity cost is 14%. a. Initial investment USD 10,000 and cash inflows each year is USD 2,000 b. Initial investment USD 25,000 and cash inflows each year is USD 3,000 c. Initial investment USD 30,000 and cash inflows each year is USD 5,000
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?
A firm is considering the following projects. Its opportunity cost of capital is 12%. Project 0...
A firm is considering the following projects. Its opportunity cost of capital is 12%. Project 0 1 2 3 4 A -8,500 +1,875 +1,875 +4,750 0 B -4,500 0 +4,500 +3,750 +4,750 C -8,500 +1,875 +1,875 +4,750 +8,500 1) What is the payback period on each project? 2) What is the discounted payback period on each project?
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT