Question
In: Finance
MUTUALLY EXCLUSIVE PROJECTS WITH EQUAL LIVES A company is evaluating if it is convenient to make...
MUTUALLY EXCLUSIVE PROJECTS WITH EQUAL
LIVES
A company is evaluating if it is convenient to make changes in its
accounting department. Its MARR is 15% per year. The current
expenses of the accounting department amount to $180,000 per year.
An option is to outsource the company’s accounting to an outside
company that will charge $150,000 per year. Another option is to
purchase a new accounting system and make a restructure of the
department which will result in savings of $65,000 per year. The
investment needed for the system and restructure is $120,000.
a) Using a study period of 10 years, what should the company do?
Use NPV
b) Using a study period of 5 years, what should the company do? Use
NPV
Solutions
jeff jeffy answered 1 year agoRelated Solutions
A firm is evaluating two mutually exclusive projects that have unequal lives. The firm must evaluate...
A firm is evaluating two mutually exclusive projects that have
unequal lives. The firm must evaluate the projects using the
annualized net present value approach and recommend which project
they should select.-- Calculate and make decision base on the
following. The firm's cost of capital has been determined to be 18
percent, and the projects have the following initial investments
and cash flows:
Project W
Project Y
Initial Investment
40,000
58,000
cash flow
1
20,000
30,000
2
20,000
35,000
3...
A company is evaluating two mutually exclusive projects in which to invest. Project A needs an...
A company is evaluating two mutually exclusive projects in which
to invest. Project A needs an investment of $300,000 and will
deliver $160,000 in annual profits during its 8 years life. Project
B needs an investment of $400,000 and will deliver $210,000 in
annual profits during its 6 years life. Considering a Study Period
of 6 years, and that project A can be sold for $200,000 at the end
of the 6th year (because it will still have 2 years...
The Riverside Company is evaluating two mutually exclusive projects: Black and White, at the end of...
The Riverside Company is evaluating two mutually exclusive
projects: Black and White, at the end of 2016. The firm’s weighted
average cost of capital is 8%. Data for each project are as
follows:
Black
White
Cost of investment—end 2016
25,000
Cost of investment—end 2016
$43,000
Cash inflow—2017
8,000
Cash inflow—2017
20,000
Cash inflow—2018
8,000
Cash inflow—2018
30,000
Cash inflow—2019
8,000
Cash inflow—2019
10,000
Cash inflow—2020
8,000
Cash inflow—2020
0
Cash inflow—2021
8,000
Cash inflow—2021
0
Time value of money tables...
(Mutually exclusive projects and NPV) You have been assigned the task of evaluating two mutually exclusive...
(Mutually exclusive projects and NPV) You have been assigned
the task of evaluating two mutually exclusive projects with the
following projected cash flows: If the appropriate discount rate
on these projects is 11 percent, which would be chosen and why?
What is the NPV of project A? $ nothing (Round to the nearest
cent.) What is the NPV of project B? $ (Round to the nearest
cent.) Which project would be chosen and why? (Select the best
choice.) A....
(Mutually exclusive projects and NPV) You have been assigned the task of evaluating two mutually exclusive...
(Mutually exclusive projects and NPV)
You have been assigned the task of evaluating two mutually
exclusive projects with the following projected cash flows:
YEAR
PROJECT A
CASH FLOW
PROJECT B
CASH FLOW
0
−$110,000
−$110,000
1
30,000
0
2
30,000
0
3
30,000
0
4
30,000
0
5
30,000
220,000
(Click
on the icon located on the top-right corner of the data table
above in order to copy its contents into a
spreadsheet.)
If the appropriate discount rate on these...
(Mutually exclusive projects and NPV) You have been assigned the task of evaluating two mutually exclusive...
(Mutually exclusive projects and NPV) You have been assigned
the task of evaluating two mutually exclusive projects with the
following projected cash flows:
YEAR PROJECT A CASH FLOW PROJECT B CASH
FLOW
0 -105,000 -105,000
1 40,000 0
2 40,000 0
3 40,000 0
4 40,000 0
5 40,000 240,000
If the appropriate discount rate on these projects is 8
percent, which would be chosen and why? What is the NPV of
project A? What is the NPV of project...
Yong Importers, an Asian import company, is evaluating two mutually exclusive projects, A and B. The...
Yong Importers, an Asian import company, is evaluating two
mutually exclusive projects, A and B. The relevant cash flows for
each project are given in the table below. The cost of capital for
use in evaluating each of these equally risky projects is 10
percent. The annualized NPV of Project B is ________.
Project A Project B Initial Investment
$350,000 $425,000
Year Cash Inflows (CF)
1 $140,000 $175,000
2 $165,000 $150,000
3 $190,000 $125,000
4 00000000 $100000
5 00000000 $75,000...
All techniques with NPV profile Mutually exclusive projects Projects A and B, of equal risk, are...
All techniques with NPV profile Mutually exclusive
projects Projects A and B, of equal risk, are alternatives for
expanding Rosa Company's capacity. The firm's cost of capital is
16%. The cash flows for each project are shown in the following
table:
Initial investment $130,000
$100,000
Year Cash inflows
1 $30,000 $30,000
2 $35,000 $30,000
3 $40,000 $30,000
4 $45,000 $30,000
5 $50,000 $30,000
a. Calculate each project's payback
period.
b. Calculate the net present value (NPV) for each project.
c. ...
You are evaluating two mutually exclusive projects. The cash flows for each are:
You are evaluating two mutually exclusive
projects. The cash flows for each are:
Project
A Project
B
Year
0 ($60,000) ($85,000)
Year
1 $20,000 $22,000
Year
2 $35,000 $25,000
Year
3 $20,000 $30,000
Year
4 $25,000 $25,000
Year
5 $15,000
Year
6 $10,000
Year
7 $10,000
Year
8 $10,000
Assume that, if needed, each project is repeatable with no
change in cash flows. Your cost of capital is 13%.
Using the replacement chain approach, which project would you
chose to...
MUTUALLY EXCLUSIVE PROJECTS WITH DIFFERENT LIVES You are offered a food concession at the Charros de...
MUTUALLY EXCLUSIVE PROJECTS WITH DIFFERENT
LIVES
You are offered a food concession at the Charros de Jalisco Stadium
to sell food during the matches. You expect to have profits of
$40,000 every match and there are 20 matches per season (year).
There are two options: Pay an initial fee of $2,000,000 for a 10
year contract, or pay an initial fee of $1,000,000 for a 5 year
contract (only 5 years, it can’t be renewed). With a MARR of 10%...
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