Question

In: Finance

2 POTENTIAL CAPITAL PROJECTS HAVE THE FOLLOWING ESTIMATED CASHFLOWS                                

2 POTENTIAL CAPITAL PROJECTS HAVE THE FOLLOWING ESTIMATED CASHFLOWS

                                                            PROJECT 1                            PROJECT 2

YEAR                                                                         CASHFLOW                          CASHFLOW

   1                                                                               $95,000                                   $112,000

   2                                                                               $150,000                                 $95,000

   3                                                                               $1,000                                     $85,000

   4                                                                               $12,000                                   $65,000

   5                                                                               $45,000                                   $10,000

   6                                                                               $198,000                                 $15,000

BOTH PROJECTS HAVE A COST OF $300,000. THE COST OF CAPITAL IS 9.5%

A. CALCULATE THE PAYBACK FOR EACH PROJECT. STATE IF THE PROJECT IS ACCEPTABLE UNDER PAYBACK AND WHY.

B. CALCULATE THE NPV FOR EACH PROJECT. STATE IF THE PROJECT IS ACCEPTABLE UNDER NPV AND WHY.

C. CALCULATE THE IRR FOR EACH PROJECT. STATE IF THE PROJECT IS ACCEPTABLE UNDER IRR AND WHY.

D. CALCULATE THE PI FOR EACH PROJECT. STATE IF THE PROJECT IS ACCEPTABLE UNDER PI AND WHY.

E. STATE WHICH IS THE BEST PROJECT OVERALL AND WHY.

Calculate using a HP 10B-II financial calculator

Solutions

Expert Solution

Solution.>

I have solved this question in Excel. The formula used are written along with the values. If you still have any doubt, kindly ask in the comment section.

Note: Give it a thumbs up if it helps! Thanks in advance!

jeff jeffy answered 1 year ago
Next > < Previous

Related Solutions

2 POTENTIAL CAPITAL PROJECTS HAVE THE FOLLOWING ESTIMATED CASHFLOWS                                
2 POTENTIAL CAPITAL PROJECTS HAVE THE FOLLOWING ESTIMATED CASHFLOWS                                                             PROJECT 1                            PROJECT 2 YEAR                                                                         CASHFLOW                          CASHFLOW    1                                                                               $95,000                                   $112,000    2                                                                               $150,000                                 $95,000    3                                                                               $1,000                                     $85,000    4                                                                               $12,000                                   $65,000    5                                                                               $45,000                                   $10,000    6                                                                               $198,000                                 $15,000 BOTH PROJECTS HAVE A COST OF $300,000. THE COST OF CAPITAL IS 9.5% A. CALCULATE THE PAYBACK FOR EACH PROJECT. STATE IF THE PROJECT IS ACCEPTABLE UNDER PAYBACK AND WHY. B. CALCULATE THE NPV FOR EACH PROJECT. STATE IF...
2 POTENTIAL CAPITAL PROJECTS HAVE THE FOLLOWING ESTIMATED CASHFLOWS                                
2 POTENTIAL CAPITAL PROJECTS HAVE THE FOLLOWING ESTIMATED CASHFLOWS                                                             PROJECT 1                            PROJECT 2 YEAR                                                                         CASHFLOW                          CASHFLOW    1                                                                               $95,000                                   $112,000    2                                                                               $150,000                                 $95,000    3                                                                               $1,000                                     $85,000    4                                                                               $12,000                                   $65,000    5                                                                               $45,000                                   $10,000    6                                                                               $198,000                                 $15,000 BOTH PROJECTS HAVE A COST OF $300,000. THE COST OF CAPITAL IS 9.5% A. CALCULATE THE PAYBACK FOR EACH PROJECT. STATE IF THE PROJECT IS ACCEPTABLE UNDER PAYBACK AND WHY. B....
2 POTENTIAL CAPITAL PROJECTS HAVE THE FOLLOWING ESTIMATED CASHFLOWS                                
2 POTENTIAL CAPITAL PROJECTS HAVE THE FOLLOWING ESTIMATED CASHFLOWS                                                             PROJECT 1                            PROJECT 2 YEAR                                                                          CASHFLOW                           CASHFLOW    1                                                                               $95,000                                   $112,000    2                                                                               $150,000                                 $95,000    3                                                                               $10,000                                   $85,000    4                                                                               $12,000                                   $65,000    5                                                                               $45,000                                   $10,000    6                                                                               $198,000                                 $ 15,000 BOTH PROJECTS HAVE A COST OF $275,000. THE COST OF CAPITAL IS 11.5% A.  Calculate the payback period for each project.  State if payback is acceptable for each project and state why. B.  Calculate the NPV for each project.  State if NPV is acceptable for each project and state why. C.  Calculate the IRR for each project.  State if IRR is acceptable for each project and...
2 POTENTIAL CAPITAL PROJECTS HAVE THE FOLLOWING ESTIMATED CASHFLOWS PROJECT 1 PROJECT 2 YEAR CASHFLOW CASHFLOW...
2 POTENTIAL CAPITAL PROJECTS HAVE THE FOLLOWING ESTIMATED CASHFLOWS PROJECT 1 PROJECT 2 YEAR CASHFLOW CASHFLOW 1 $95,000 $112,000 2 $150,000 $95,000 3 $10,000 $85,000 4 $12,000 $65,000 5 $45,000 $10,000 6 $198,000 $15,000 BOTH PROJECTS HAVE A COST OF $275,000. THE COST OF CAPITAL IS 11.5%. A) Calculate the payback period for each project. State if payback is acceptable for each project and state why. B) Calculate the NPV for each project. State if NPV is acceptable for each...
As director of capital budgeting, you are reviewing three potential investment projects with the following cost...
As director of capital budgeting, you are reviewing three potential investment projects with the following cost and cash flow projections. Cash Flow Project A Project B Project C Investment Cost ($400,000) ($375,000) ($400,000) Year One Cash Flow $200,000 $75,000 $50,000 Year Two Cash Flow $50,000 $75,000 $120,000 Year Three Cash Flow $75,000 $85,000 $140,000 Year Four Cash Flow $50,000 $225,000 $125,000 Year Five Cash Flow $125,000 $60,000 $125,000 1.Calculate the Internal Rate of Return (IRR) for each project. 2.Assuming your...
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)...
Should firms reassess their cost of capital as they assess potential projects or acquisitions?
Should firms reassess their cost of capital as they assess potential projects or acquisitions?
Two possible projects have beenidentified for potential selection (i.e., Project 1 or Project 2).These...
Two possible projects have been identified for potential selection (i.e., Project 1 or Project 2). These projects should be evaluated based on the following criteria: Strategic fit; Probability of technical success; Financial risk; Potential profit; Strategic leverage; and Recommendations. Using the weighted scoring model and the information provided below, determine which project you should pursue:The weighted project score forProject 1 was calculated to be68.25 (you should check this value to verify that your method is correct).Using the information, evaluate the...
NPV and IRR and Cashflows of Finite Projects Company XYZ decides to invest in a $25,000,000...
NPV and IRR and Cashflows of Finite Projects Company XYZ decides to invest in a $25,000,000 project. The company will finance the project with 50% debt and 50% equity. The term of the loan is interest only, compounded annually, 5%, and over 5 years. The project will allow the company to produce and sell an additional 100,000 widgets at $130 a widget. The cost of producing each widget is 50% of revenue. Furthermore, the project will fully depreciate in 5...
1. Assume you have the following cashflows Time: 0 1 2. 3 4 5 Cf: 21...
1. Assume you have the following cashflows Time: 0 1 2. 3 4 5 Cf: 21 4 5 6. 6(1 + .02). 6(1+.02)^2 After year 3 cashflows will grow by constant 2% rate What is the discounted present value of these cashflows if your project's cost of capital is 13%?
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT