Question

In: Finance

LaVerne’s Pie Standis evaluating three independent projects and it is your job to decide which, if...

LaVerne’s Pie Standis evaluating three independent projects and it is your job to decide which, if any, to accept. Using the payback period and NPV methods of analysis, come to an accept/reject decision for all projects and explain. The company uses a 6% discount rate.

Projects

Year 0

1

2

3

4

5

6

A

-$1,000

$5,000

$4,500

$4,500

$2,500

$2,500

$0

B

-$9,000

$1,000

$1,000

$2,500

$3,000

$5,000

$500

C

-$3,000

$500

$500

$500

$500

$500

$1,500

Solutions

Expert Solution

Please upvote if the ans is helpful. Thanks.


Related Solutions

Your company is evaluating the following 9 independent indivisible projects. The company’s capital budgeting for the...
Your company is evaluating the following 9 independent indivisible projects. The company’s capital budgeting for the year is limited to a maximum of $20,000. Use solver with simplex linear programing method to find the set of projects that should be included in the capital budget. (Mark all that applies) Project NPV cost A 500.00 2,000.00 B 2,000.00 7,000.00 C 1,800.00 3,000.00 D 3,000.00 5,000.00 E 800.00 2,200.00 F 1,700.00 5,000.00 G 1,800.00 4,000.00 H 3,500.00 5,800.00 I 2,200.00 4,800.00
A financial analyst needs to evaluate two independent investments and decide which projects should be purchased....
A financial analyst needs to evaluate two independent investments and decide which projects should be purchased. Project A costs $150,000 and has an IRR of 12 percent, and Project B costs $140,000 and has an IRR of 10 percent. The capital structure consists of 20 percent debt and 80 percent common equity, and its component costs of capital are rdt 5 4%, rs 5 10%, and re 5 12.5%. If the company expects to generate $230,000 in retained earnings this...
Your company is trying to decide which one of two projects it should accept. Both projects...
Your company is trying to decide which one of two projects it should accept. Both projects have the same start-up costs. Project 1 will produce annual cash flows of $52 000 at the end of each year for six years. Project 2 will produce cash flows of $39 000 at the beginning of each year for eight years. The company requires a 15% return. Required: a. Whichprojectshouldthecompanyselectandwhy? b. Whichprojectshouldthecompanyselectiftheinterestrateis12%atthe cash flows in Project 2 is also at the end of...
Walsh Company is considering three independent projects, each of which requires a $6 million investment. The...
Walsh Company is considering three independent projects, each of which requires a $6 million investment. The estimated internal rate of return (IRR) and cost of capital for these projects are presented below: Project H (High risk): Cost of capital = 16% IRR = 21% Project M (Medium risk): Cost of capital = 14% IRR = 11% Project L (Low risk): Cost of capital = 7% IRR = 9% Note that the projects' costs of capital vary because the projects have...
Lane Industries is considering three independent projects, each of which requires a $2.5 million investment. The...
Lane Industries is considering three independent projects, each of which requires a $2.5 million investment. The estimated internal rate of return (IRR) and cost of capital for these projects are presented here: Project H (high risk): Cost of capital = 15% IRR = 17% Project M (medium risk): Cost of capital = 10% IRR = 8% Project L (low risk): Cost of capital = 7% IRR = 8% Note that the projects' costs of capital vary because the projects have...
A company is evaluating two independent projects for capital investment purposes. If the company has only...
A company is evaluating two independent projects for capital investment purposes. If the company has only $85 million to invest, and its required return is 10 percent by how much the company’s value will increase? All values are in millions. Project 1 Project 2 0 -50 -50 1 30 0 2 25 0 3 20 0 4 20 150 A) 52.45 million B) 26.62 million C) 79.07 million D) 60.77 million E) 45.33 million
Your company is considering three independent projects. Given the following cash flow information, calculate the payback...
Your company is considering three independent projects. Given the following cash flow information, calculate the payback period for each. If your company requires a three-year payback before an investment can be accepted, which project(s) would be accepted? Project D Project E Project F Cost 205,000.00 179,000.00 110,000.00 Inflow year 1 53,000.00 51,000.00 25,000.00 Inflow year 2 50,000.00 87,000.00 55,000.00 Inflow year 3 48,000.00 41,000.00 21,000.00 Inflow year 4 30,000.00 52,000.00 9,000.00 Inflow year 5 24,000.00 40,000.00 35,000.00 Payback Period EXACT...
OpenSea, Inc. is evaluating investment opportunities and should decide between two mutually exclusive projects: A, or...
OpenSea, Inc. is evaluating investment opportunities and should decide between two mutually exclusive projects: A, or B. Both projects require the same initial investments 14 million and generate different cash flows as follow: -Project (A) generates 3.0 million per year in a perpetuity - Project (B) generates 1.9 million in perpetuity growing at 2.2% (forever) If OpenSea is using the IRR to make her final decision, calculate the IRR of each of the following project. Calculate the NPV of both...
Newago, Inc. is strapped for cash for investment projects and must decide which of four projects...
Newago, Inc. is strapped for cash for investment projects and must decide which of four projects it will fund. Below are the projects and information about them: Life Of: Net The Internal Investment Present Project Rate Of Project Required Value In Yrs. Return 1. 80,000 210,000 6 13% 2. 750,000 340,000 10 17% 3. 845,000 333,000 7 12% 4. 695,000 202,000 5 18% A. Compute the project profitability index for each project. B. Rank the four projects in order of...
Costco is evaluating three projects and will select the one with the highest NPV. The company's...
Costco is evaluating three projects and will select the one with the highest NPV. The company's cost of capital is 14.5%. Which project should Costco choose? IRR Investment CF - Y1 CF - Y2 CF - Y3 Project A 11.00% 75,000 35,000 40,000 45,000 Project B 15.00% 90,000 55,000 50,000 43,000 Project C 15.00% 50,000 40,000 25,000 11,000 a. Project A b. Project B c. Project C d. None of the above
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT