Question
In: Finance
(NPV, PI, and IRR calculations) You are considering two independent projects, project A and project B....
(NPV,
PI, and IRR
calculations)
You are considering two independent projects, project A and project B. The initial cash outlay associated with project A is
$50,000
and the initial cash outlay associated with project B is
$70,000
The required rate of return on both projects is
12
percent. The expected annual free cash inflows from each project are in the popup window:
.Calculate the
NPV,
PI,
and IRR for each project and indicate if the project should be accepted.
a. What is the NPV of project A?
$nothing
(Round to the nearest cent.)
|
PROJECT A |
PROJECT B |
|
|||||||||||||
|
Initial Outlay |
-50,000 |
−$70,000 |
|||||||||||||
|
Inflow year 1 |
15,000 |
16,000 |
|||||||||||||
|
Inflow year 2 |
15,000 |
16,000 |
|||||||||||||
|
Inflow year 3 |
15,000 |
16,000 |
|||||||||||||
|
Inflow year 4 |
15,000 |
16,000 |
|||||||||||||
|
Inflow year 5 |
15,000 |
16,000 |
|||||||||||||
|
Inflow year 6 |
15,000 |
16,000 |
|||||||||||||
Solutions
jeff jeffy answered 1 year agoRelated Solutions
(NPV, PI, and IRR calculations) You are considering two independent projects, project A and project B....
(NPV,
PI, and IRR
calculations)
You are considering two independent projects, project A and
project B. The initial cash outlay associated with project A is
$50,000
and the initial cash outlay associated with project B is
$70,000
The required rate of return on both projects is
9
percent. The expected annual free cash inflows from each project
are in the popup window:
Calculate the
NPV,
PI,
and IRR for each project and indicate if the project should be
accepted.
...
NPV, PI, and IRR calculations) You are considering a project with an initial cash outlay of...
NPV, PI, and IRR calculations) You are considering a project
with an initial cash outlay of $70,000 and expected free cash
flows of $28,000 at the end of each year for 6 years. The required
rate of return for this project is 7 percent.
a. What is the project's payback period?
b. What is the project's NPV?
c. What is the project's PI?
d. What is the project's IRR?
(Payback period, NPV, PI, and IRR calculations) You are considering a project with an initial cash...
(Payback
period, NPV, PI, and IRR
calculations)
You are considering a project with an initial cash outlay of
$90,000
and expected free cash flows of
$28,000
at the end of each year for
5
years. The required rate of return for this project is
6
percent.
a. What is the project's payback period?
b. What is the project's
NPV?
c. What is the project's
PI?
d. What is the project's
IRR?
(Payback period, NPV, PI, and IRR calculations) You are considering a project with an initial cash...
(Payback period, NPV, PI, and IRR calculations) You are
considering a project with an initial cash outlay of $80000 and
expected free cash flows of $25000 at the end of each year for 6
years. The required rate of return for this project is 9
percent.
a. What is the project's payback period?
b. What is the project's NPV?
c. What is the project's PI?
d. What is the project's IRR?
(Payback period, NPV, PI, and IRR calculations) You are considering a project with an initial cash...
(Payback period, NPV, PI, and IRR calculations) You are
considering a project with an initial cash outlay of $70,000 and
expected free cash flows of $28,000 at the end of each year for 5
years. The required rate of return for this project is 8
percent.
a. What is the project's payback period?
b. What is the project's NPV?
c. What is the project's PI?
d. What is the project's IRR?
(Payback period, NPV, PI, and IRR calculations) You are considering a project with an initial cash...
(Payback period, NPV, PI, and IRR calculations) You are
considering a project with an initial cash outlay of $90,000 and
expected free cash flows of $22,000 at the end of each year for 7
years. The required rate of return for this project is 9
percent.
a. What is the project's payback period?
b. What is the project's NPV?
c. What is the project's PI?
d. What is the project's IRR?
(Payback period, NPV, PI, and IRR calculations) You are considering a project with an initial cash...
(Payback period, NPV, PI, and IRR calculations) You are
considering a project with an initial cash outlay of $90,000 and
expected free cash flows of $26,000 at the end of each year for 6
years. The required rate of return for this project is 6
percent.
a. What is the project's payback period?
b. What is the project's NPV?
c. What is the project's PI?
d. What is the project's IRR?
(Payback period, NPV, PI, and IRR calculations) You are considering a project with an initial cash...
(Payback period, NPV, PI, and IRR calculations) You are
considering a project with an initial cash outlay of $80,000 and
expected free cash flows of $24,000 at the end of each year for 7
years. The required rate of return for this project is 6
percent.
a. What is the project's payback period?
3.33 years
b. What is the project's NPV?
____
c. What is the project's PI?
_____
d. What is the project's IRR?
_____
For independent projects, is it true that if PI>1.0, then NPV>0 and IRR>K? prove
For independent projects, is it true that if PI>1.0, then
NPV>0 and IRR>K? prove
(Payback period calculations) You are considering three independent projects: project A, project B, and project C....
(Payback period calculations) You are considering three
independent projects: project A, project B, and project C. Given
the free cash flow information in the popup window, calculate the
payback period for each. If you require a 3-year payback before an
investment can be accepted, which project(s) would be
accepted?
Initial Outlay -900 -10,000
-6,500
Inflow year 1 700 6,000
2,000
Inflow year 2 400 4,000
2,000
Inflow year 3 200 4,000
4,000
Inflow year 4 100 4,000
4,000
Inflow year...
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