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In: Finance
Sapphire Project and Jade Project of equal risk are alternative for expanding Sinaran Company Capacity. The...
Sapphire Project and Jade Project of equal risk are alternative for expanding Sinaran Company Capacity. The firms cost of capital is 13%. The initial investment and cash flows associated with these projects are shown in the following table.
|
Initial Investment (CF0) |
Sapphire Project |
Jade Project |
|
RM80,000 |
RM50,000 |
|
|
Year (t) |
Cash inflows (CFt) RM |
|
|
0 |
-365,000 |
-40,000 |
|
1 |
38,000 |
20,300 |
|
2 |
47,000 |
15,200 |
|
3 |
62,000 |
14,100 |
|
4 |
455,000 |
11,200 |
- Calculate the payback period for each project. Which investment will you choose? Why?
- Calculate the net present value (NPV) for each project. Which investment will you choose? Why?
- Calculate the profitability Index (PI) for each project. Which investment will you choose? Why?
- Based on your answers in (a) through (c), which project will you finally choose? Explain why?
Solutions
Expert Solution
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jeff jeffy answered 1 year agoRelated Solutions
Projects A and? B, of equal? risk, are alternatives for expanding Rosa? Company's capacity. The? firm's...
Projects A and? B, of equal? risk, are alternatives for
expanding Rosa? Company's capacity. The? firm's cost of capital is
11?%.
The cash flows for each project are shown in the following?
table:
Project A
Project B
Initial investment
?(CF
0CF0?)
?$130,000
?$100,000
Year
?(t?)
Cash inflows
?(CF Subscript
tCFt?)
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.??Calculate...
Projects A and B, of equal risk, are alternatives for expanding Rosa Company's capacity. The firm's...
Projects A and B, of equal risk, are alternatives for
expanding Rosa Company's capacity. The firm's cost of capital is
13%.
The cash flows for each project are shown in the following
table: .
a. Calculate each project's payback
period.
b. Calculate the net present value (NPV) for each project.
c. Calculate the internal rate of return (IRR) for each
project.
d. Indicate which project you would recommend.
Initial investment $160,000
$130,000
Year Cash inflows
1 $40,000 $40,000
2 $45,000 ...
Projects A and B, both of equal risk, are mutually exclusive alternatives for expanding Corporation’s capacity....
Projects A and B, both of equal risk,
are mutually exclusive alternatives for expanding
Corporation’s capacity. The firm’s cost of capital is 13%. The cash
flows for each project are shown in the following table.
Project
A
Project B
Year
0:
($80,000)
Year
0:
($80,000)
Year
1:
$15,000
Year
1:
$15,000
Year
2:
$20,000
Year
2:
$15,000
Year
3:
$25,000
Year
3:
$15,000
Year
4:
$30,000
Year
4:
$35,000
Year
5:
$30,000 ...
Projects A and B, both of equal risk, are mutually exclusive alternatives for expanding Corporation’s capacity....
Projects A and B, both of equal risk, are mutually exclusive
alternatives for expanding Corporation’s capacity. The firm’s
cost of capital is 13%. The cash flows for each project are shown
in the following table.
Project
A Project
B
Year
0:
($80,000)
Year
0:
($80,000)
Year
1:
$15,000
Year
1:
$15,000
Year
2:
$20,000
Year
2:
$15,000
Year
3:
$25,000
Year
3:
$15,000
Year
4:
$30,000
Year
4:
$35,000
Year
5:
$30,000
Year
5: ...
The following two projects of equal risk are mutually exclusive alternatives for expanding the firm’s capacity....
The following two projects of equal risk are mutually exclusive
alternatives for expanding the firm’s capacity. The firm’s cost of
capital is 15%. The cash flows for each project are given in the
following table.
Year Project A Project B
0 210,000 20,000
1 15,000 12,000
2 30,000 10,500
3 32,000 9,500
4 425,000 8,200
Required:
a) Calculate each project’s payback period. Using the payback
period criterion which project is preferable? b)
Calculate the net present value for each project....
The following two projects of equal risk are mutually exclusive alternatives for expanding the firm’s capacity....
The
following two projects of equal risk are mutually exclusive
alternatives for expanding the firm’s capacity. The firm’s cost of
capital is 15%. The cash flows for each project are given in the
following table.
PROJECT A
PROJECT B
Initial investment
210,000
20,000
Year
Net cash inflows
Net cash inflows
1
15,000
12,000
2
30,000
10,500
3
32,000
9,500
4
425,000
8,200
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