Question

In: Finance

Consider the following cash flows for two mutually exclusive capital investment projects. The required rate of...

Consider the following cash flows for two mutually exclusive capital investment projects. The required rate of return is 16%. Use this information for the next 3 questions. Year Project A Cash Flow Project B Cash Flow 0 ($50,000) ($20,000) 1 15,000 6,000 2 15,000 6,000 3 15,000 6,000 4 13,500 5,400 5 13,500 5,400 6 6,750 5,400 Calculate the net present value of project A.

Answers:

a.342.28 b.1564.25 c.1245.11 d. 2709.21 e. 3802

Solutions

Expert Solution

Ans a. $ 342.28

Year Project Cash Flows (i) DF@ 16% DF@ 16% (ii) PV of Project ( (i) * (ii) )
0 -50000 1 1                          (50,000.00)
1 15000 1/((1+16%)^1) 0.862069                             12,931.03
2 15000 1/((1+16%)^2) 0.743163                             11,147.44
3 15000 1/((1+16%)^3) 0.640658                               9,609.87
4 13500 1/((1+16%)^4) 0.552291                               7,455.93
5 13500 1/((1+16%)^5) 0.476113                               6,427.53
6 6750 1/((1+16%)^6) 0.410442                               2,770.49
NPV                                   342.28

jeff jeffy answered 1 year ago
Next > < Previous

Related Solutions

Consider the following cash flows for two mutually exclusive capital investment projects. The required rate of...
Consider the following cash flows for two mutually exclusive capital investment projects. The required rate of return is 15%. Use this Year         Project A Cash Flow        Project B Cash Flow 0                         -$40,000                           -$30,000 1                              12,000                            9,000 2                              12,000                             9,000 3                              12,000                             9,000 4                              10,800      8,100 5                              10,800                              8,100 6                              5,400      8,100 9. Which of the following statements is true concerning projects A and B? a) Both NPV and IRR lead to the same investment decision. b) Due to time disparity, IRR indicates that project A should be accepted and NPV indicates that project B...
Consider the following two mutually exclusive projects and their Cash Flows ($)
Consider the following two mutually exclusive projects and their Cash Flows ($)Project                                            C0                               C1                               C2                               C3K                                                       –$100                 +$45 +$45 +$60    W                                                     –$150                 +$45 +$45 +$125Which statement is correct based on the above information about Projects K and W?a. If the discount rate is 7.5%, accept project W because the cross-over rate is 9%b. Accept project K, because at a 9% discount rate K and W have the same net present value.c. If the discount rate is 9.5%, reject project K, because the...
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)...
Consider the cash flows from two mutually exclusive projects
Use the following information to answer the next three questions. Consider the cash flows from two mutually exclusive projects: Cash FlowYearProject AProject B0-$420,000-$420,0001$140,000$400,0002$230,000$110,0003$331,000$140,000The appropriate discount rate is 8.5%.Calculate the internal rate of return (IRR) for both projects, and determine which project should be accepted based on IRR.
Comparing Investment Criteria. Consider the following cash flows of two mutually exclusive projects for Tokyo Rubber...
Comparing Investment Criteria. Consider the following cash flows of two mutually exclusive projects for Tokyo Rubber Company. Assume the discount rate for both projects is 8% Year                Deepwater Fishing                  New Submarine Ride 0                      -$1,700,000                             -$750,000 1                      1,100,000                               375,000           2                         900,000                                600,000 3                         750,000                                390,000 b) Based on the NPV, which project should be taken? c) Based on IRR, which project should be taken?
Comparing Investment Criteria. Consider the following cash flows of two mutually exclusive projects for Spartan Rubber...
Comparing Investment Criteria. Consider the following cash flows of two mutually exclusive projects for Spartan Rubber company.  Assume the discount rate for both projects is 10 percent. a. Based on the payback period, which project should be taken? b. Based onthe NPV, which project should be taken? c.  Based on the IRR, which project should be taken? d.  Based on the above analysis, is incremental IRR analysis necessary?  If yes, please conduct the analysis. Year Dry Prepreg Solvent Prepreg 0 (1,800,000) (925,000) 1 690,000...
Consider the following cash flows of two mutually exclusive projects for AZ-Motorcars. Assume the discount rate...
Consider the following cash flows of two mutually exclusive projects for AZ-Motorcars. Assume the discount rate for AZ-Motorcars is 8 percent. Year 0 AZM mini-suv 480000 AZF full-suv 830000 year1 azm mini-suv 326000 azf full suv 356000 year 2 azm mini-suv 192000 azf full-suv 432000 year 3 azm mini suv 156000 azf full-suv 296000 what is the payback period for each project? what is the NPV for each project? what is the IRR for each project?
Consider the following cash flows of two mutually exclusive projects for AZ-Motorcars. Assume the discount rate...
Consider the following cash flows of two mutually exclusive projects for AZ-Motorcars. Assume the discount rate for both projects is 8 percent.    Year AZM Mini-SUV AZF Full-SUV 0 –$ 530,000 –$ 880,000 1 336,000 366,000 2 212,000 452,000 3 166,000 306,000    a. What is the payback period for each project? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)    Payback period   AZM Mini-SUV years   AZF Full-SUV years     b. What is...
Consider the following cash flows of two mutually exclusive projects for AZ-Motorcars. Assume the discount rate...
Consider the following cash flows of two mutually exclusive projects for AZ-Motorcars. Assume the discount rate for both projects is 11 percent.    Year AZM Mini-SUV AZF Full-SUV 0 –$ 520,000 –$ 870,000 1 334,000 364,000 2 208,000 448,000 3 164,000 304,000    a. What is the payback period for each project? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)     b. What is the NPV for each project? (Do not round intermediate...
Consider the following cash flows of two mutually exclusive projects for AZ-Motorcars. Assume the discount rate...
Consider the following cash flows of two mutually exclusive projects for AZ-Motorcars. Assume the discount rate for both projects is 9 percent.    Year AZM Mini-SUV AZF Full-SUV 0 –$ 485,000 –$ 835,000 1 327,000 357,000 2 194,000 434,000 3 157,000 297,000    a. What is the payback period for each project? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)     b. What is the NPV for each project? (Do not round intermediate...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT