Question
In: Finance
Your firm is subject to capital rationing and can only invest $60,000. You've estimated the following...
Your firm is subject to capital rationing and can only invest $60,000. You've estimated the following cash flows (in $) for two projects: just need answers don't need formula and steps
| Year | Project A | Project B |
| 0 | -55,000 | -55,000 |
| 1 | 10,000 | 30,000 |
| 2 | 20,000 | 20,000 |
| 3 | 30,000 | 10,000 |
| 4 | 40,000 | 0 |
The required return for both projects is 8%.
A:What is the payback period for project A? 2 Decimals
B:What is the payback period for project B? 2 decimals
C:Which project seems better according to the payback method?
Project B
Project A
D:What is the NPV for project A?
G:What is the NPV for project B?
E:Which project seems better according to the NPV method?
Project A
Project B
F:Compare the answers to parts 3 and 6. If both projects are mutually exclusive, which one should you accept?
Project B
Project A
Solutions
jeff jeffy answered 2 years agoRelated Solutions
Your firm is subject to capital rationing and can only invest $60,000. You've estimated the following...
Your firm is subject
to capital rationing and can only invest $60,000. You've estimated
the following cash flows (in $) for two projects:
Year
Project A
Project B
0
-54,000
-54,000
1
10,000
30,000
2
20,000
20,000
3
30,000
10,000
4
40,000
0
The required return
for both projects is 8%.
What is the payback
period for project A?
What is the payback
period for project B?
Which project seems
better according to the payback method?
Project A or Project...
Your company is evaluation 4 independent projects and is subject to capital rationing, detailed as follows:...
Your company is evaluation 4 independent projects and is subject
to capital rationing, detailed as follows:
Project Initial
Outlay IRR NPV
1 2
million 18%
2,500,000
2 1
million 15% 950,000
3 1
million 10% 600,000
4 3
million 9%
2,000,000
If you must select projects subject to a budget constraint of 3
million dollars, which set of projects should be accepted so as to
maximize firm value?
1 and 2
1 only
1, 2 and 3
1 and 4
2, 3 and 4
ABC Company is experiencing hard capital rationing and will not be able to invest more than...
ABC Company is experiencing hard capital rationing and will not
be able to invest more than $1,000,000 this year. The firm is
considering four mutually exclusive projects with the cash flows
presented below. If the firm’s cost of capital is 8% per year,
answer the following questions:
Period
CFs of Project A, $
CFs of Project B, $
CFs of Project C, $
CFs of Project D, $
0
-750,000
-1,000,000
-1,000,000
-250,000
1
350,000
400,000
500,000
120,000
2
350,000...
A firm utilizes a strategy of capital rationing, which is currently $375,000 and is considering the...
A firm utilizes a strategy of capital rationing, which is
currently $375,000 and is considering the following two projects:
Project A has a cost of $335,000 and the following cash flows: year
1 $140,000; year 2 $150,000; and year 3 $100,000. Project B has a
cost of $365,000 and the following cash flows: year 1 $220,000;
year 2 $110,000; and year 3 $150,000. Using a 6% cost of capital,
which decision should the financial manager make?
Select project A.
Select...
A firm utilizes a strategy of capital rationing, which is currently $375,000 and is considering the...
A firm utilizes a strategy of capital rationing, which is
currently $375,000 and is considering the following two projects:
Project A has a cost of $335,000 and the following cash flows: year
1 $140,000; year 2 $150,000; and year 3 $100,000. Project B has a
cost of $365,000 and the following cash flows: year 1 $220,000;
year 2 $110,000; and year 3 $150,000. Using a 6% cost of capital,
what is the internal rate of return of project B?
Your firm has estimated the following cash flows for two mutually exclusive capital investment projects. The...
Your firm has estimated the following cash flows for two
mutually exclusive capital investment projects. The firm's required
rate of return is 13%. Use this information for the next 3
questions.
Year Project A Cash Flow Project B Cash
Flow
0 -$100,000 -$100,000
1 28,900 48,000
2 28,900 40,000
3 28,900 40,000
4 28,900
5 28,900
Which of the following statements best describes projects A and
B?
a) Project A should be accepted because it has the highest
NPV.
b)...
Your firm has estimated the following inverse demand curve for the market in which your firm...
Your firm has estimated the following inverse demand curve for
the market in which your firm operates:
P = 600 - 1/3Q(d)
The prevailing market price is currently $100 a unit.
Determine which of the following statements are correct
(multiple statements may be correct).
A.) When price is equal to $700 a unit, quantity demanded is
equal to -300.
B.) At a prevailing market price of $100 a unit, consumer
surplus is equal to $375,000 and consumer expenditure would be...
You are considering the following two projects and can take only one. Your cost of capital...
You are considering the following two projects and can take
only one. Your cost of capital is 11.9%. The cash flows for the two
projects are as follows ($ million):
Project
Year 0
Year 1
Year 2
Year 3
Year 4
A
-$103
28
34
44
53
B
-$103
53
44
34
24
What is the IRR of each project? Which project should you
choose?
Select one:
a. IRR of Project A = 17.7%, IRR of Project B = 21.7%....
You are considering the following two projects and can take only one. Your cost of capital...
You are considering the following two projects and can take only
one. Your cost of capital is
11.1%.
The cash flows for the two projects are as follows ($
million):
Project
Year 0
Year 1
Year 2
Year 3
Year 4
A
−$100
$27
$32
$39
$52
B
−$100
$52
$39
$32
$22
a. What is the IRR of each project?
b. What is the NPV of each project at your cost of capital?
c. At what cost of capital...
You are considering the following two projects and can only take one. Your cost of capital...
You are considering the following two projects and can only take
one. Your cost of capital is 11.4 %. The cash flows for the two
projects are as follows ($ million):
Project
Year 0
Year 1
Year 2
Year 3
Year 4
A
−$102
$27
$31
$39
$49
B
−$102
$49
$39
$31
$20
a. What is the IRR of each project? b. What is the NPV of each
project at your cost of capital? c. At what cost of...
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