Question
In: Finance
Suppose I have two mutually exclusive projects right now. For Project 1, it gives your $...
Suppose I have two mutually exclusive projects right now. For Project 1, it gives your $ 4200 dollar instantly, but you have to pay $1000 at the end of each year for the coming five years. For Project 2, it requires you to pay $1000 each year for five years. The first payment happens right now. Every payment happens at the start of the year. But at the end of the fifth year, you will get $6000 as a return. It is the start of the first year right now. The real interest rate is 3%.
a. What are the Internal Rates of Return and Net Present Values for two projects?
b. Which one of them would you choose to invest in? Why? c. What are the payback period and a discounted payback period of Project 1?
d. What are the profitability indices of these two projects?
Solutions
jeff jeffy answered 1 year agoRelated Solutions
There are two mutually exclusive projects right now. For Project 1, it gives you $ 4200...
There are two mutually exclusive projects right now. For Project
1, it gives you $ 4200 dollar instantly, but you have to pay $1000
at the end of each year for the coming five years. For Project 2,
it requires you to pay $1000 each year for five years. The first
payment happens right now. Every payment happens at the start of
the year. But at the end of the fifth year, you will get $6000 as a
return. It...
Suppose that you have two mutually exclusive projects. A and B. Project A has cash flows...
Suppose that you have two mutually exclusive projects. A and B.
Project A has cash flows of CF0, CF1, CF2, CF3, CF4, CF5. (Years
0-5). Project B has cash flow of CF0, CF1, CF2, CF3. The discount
rate for the projects is 10.5%.
a) Analyze these two projects and recommend a project to
accept.
b) Carefully outline all your analysis and reasoning and discuss
your methodologies for arriving at your solution in detail.
Project A
Project B
CF0
(4,650.00)
(8,300.00)...
1. There are two mutually exclusive projects. Project A requires a $600,000 initial investment and is...
1. There are two mutually exclusive projects. Project A requires
a $600,000 initial investment and is expected to provide $120,000
annual net cash inflows for 6 years. Project B requires a $740,000
initial investment and is expected to provide $200,000 annual net
cash inflows for 4 years.
Which project should you accept according to IRR method when
your cost of capital is 10%?
A. Project A
B. Project B
C. Both
D. Neither of these
2. Leveraged IRR:
A. estimates...
Your firm is considering two projects that are mutually exclusive. Each project will require an initial...
Your firm is considering two projects that are mutually
exclusive. Each project will require an initial outlay of $200,000.
The forecast yearly cash flows are shown below. Time Project A
Project B 0 -200,000 -200,000 1 -25,000 120,000 2 80,000 80,000 3
100,000 40,000 4 140,000 25,000
a) Calculate the payback period (undiscounted) of each project.
Include fractional periods (e.g., x.xx years) in your response, if
applicable. b) Calculate the IRR of each project. c) Calculate the
Modified IRR (MIRR)...
We have two independent and mutually exclusive projects, A and B. Project A requires an initial...
We have two independent and mutually
exclusive projects, A and B. Project A requires an initial
investment of $1500, and will yield $800 of cash inflows for the
next three years. Project B requires an initial investment of
$5000, and will yield $1,500 of cash inflows for the next five
years. The required return on each project is 10%.
a. What are the net present values of
Project A and Project B?
b. What is the problem with using the...
We have two independent and mutually exclusive projects, A and B. Project A requires an initial...
We have two independent and mutually exclusive projects, A and
B. Project A requires an initial investment of $1000, and will
yield $500 of cash inflows for the next three years. Project B
requires an initial investment of $3,500, and will yield $1,000 of
cash inflows for the next five years. The required return on both
projects is 10%.
(13 marks total)
a. What are the net present values of Project A and Project B?
b. What is...
We have two independent and mutually exclusive projects, A and B. Project A requires an initial...
We have two independent and mutually
exclusive projects, A and B. Project A requires an initial
investment of $1500, and will yield $800 of cash inflows for the
next three years. Project B requires an initial investment of
$5000, and will yield $1,500 of cash inflows for the next five
years. The required return on each project is 10%.
(13 marks total)
a. What are the net
present values of Project A and Project B?
b. ...
1. Suppose your firm is considering two mutually exclusive, required projects with the cash flows shown...
1.
Suppose your firm is considering two mutually exclusive, required
projects with the cash flows shown as follows. The required rate of
return on projects of both of their risk class is 8 percent, and
the maximum allowable payback and discounted payback statistic for
the projects are two and three years, respectively.
Time
0
1
2
3
Project A Cash Flow
?20,000
10,000
30,000
1,000
Project B Cash Flow
?30,000
10,000
20,000
50,000
Use the discounted payback decision rule to...
Anderson Associates is considering two mutually exclusive projects that have the following cash flows: Project A...
Anderson Associates is considering two mutually exclusive
projects that have the following cash flows: Project A Project B
Year Cash Flow Cash Flow 0 -$10,000 -$8,000 1 4,000 7,000 2 2,000
3,000 3 6,000 1,000 4 8,000 3,000 At what cost of capital do the
two projects have the same net present value? (That is, what is the
crossover rate?) Enter your answer rounded to two decimal places.
Do not enter % in the answer box. For example, if your...
Two projects being considered are mutually exclusive and have the following cash flows: Year Project A...
Two projects being considered are mutually exclusive and have
the following cash flows:
Year
Project A
Project B
0
-$50,000
-$50,000
1
15,000
0
2
15,000
0
3
15,000
0
4
15,000
0
5
15,000
90,000
1) Calculate NPV of each project if
the required rate of return on these projects is 8 percent.
2) which would be chosen and why?
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