ABC Corp. has the following mutually exclusive projects that both have a required return of 13.93...

ABC Corp. has the following mutually exclusive projects that both have a required return of 13.93 %:

Year	Project A	Project B
0	$-14,227	$-9,648
1	9,216	4,475
2	7,177	4,288
3	2,375	6,118

What is the NPV of project B? (Round answer to 2 decimal places, do not round intermediate calculations)

Expert Solution

	Cash Flow		PV of Cash Flow
	Project- A	Project- B	PV [email protected]%	Project- A	Project- B
0	$ -14,227.00	$ -9,648.00	$ 1.00	$ -14,227.00	$ -9,648.00
1	$ 9,216.00	$ 4,475.00	$ 0.88	$ 8,088.88	$ 3,927.71
2	$ 7,177.00	$ 4,288.00	$ 0.77	$ 5,529.16	$ 3,303.48
3	$ 2,375.00	$ 6,118.00	$ 0.68	$ 1,605.98	$ 4,136.99
NPV		$ 997.02	$ 1,720.17

--

PV of Cash Flow = Cash Flow*PV Factor

-----

Hope you understood.

jeff jeffy answered 1 year ago

Garage, Inc., has identified the following two mutually exclusive projects. The required rate of return on...

Garage, Inc., has identified the following two mutually exclusive projects. The required rate of return on both projects is 12%. Which project should the company choose and why? Year Cash Flow (A) Cash Flow (B) 0 -$29,000 -$29,000 1 14,400 4,400 2 12,300 9,800 3 9,200 18,500 4 8,100 16,800 A: Choose A because project A has a higher IRR B: Choose B because project B has a higher NPV C: Choose B because project B has shorter payback period...

You are considering the following three mutually exclusive projects. The required rate of return for all...

You are considering the following three mutually exclusive projects. The required rate of return for all three projects is 14%. Year A B C 0 $ (1,000) $(5,000) $(50,000) 1 $ 300 $ 1,700 $ 0 2 $300 $ 1,700 $15,000 3 $ 600 $1,700 $ 28,500 4 $300 $1,700 $ 33,000 What is the IRR of the best project? % terms to 2 decimal places w/o % sign

Question 3 Consider the following two mutually exclusive projects. The required rate of return is 10%....

Question 3 Consider the following two mutually exclusive projects. The required rate of return is 10%. Part A: Calculate the NPV for each project. Year Project A Project B 0 -$100,000 -$100,000 1 30,000 80,000 2 40,000 20,000 3 60,000 20,000 Part B: Calculate the IRR for each project. Part C: Calculate the payback period for each project. Part D: Suppose you were the manager deciding between these two projects. Would you prefer to use the payback period decision rule...

Comparing Investment Criteria. Consider the following two mutually exclusive design projects using a required return of...

Comparing Investment Criteria. Consider the following two mutually exclusive design projects using a required return of 18%: Year Cash flow (A) Cash flow (B) 0 -22000 -2200 1 500 1100 2 4000 900 3 10000 1100 4 42000 4000 1. Find the NPV for both projects a and b. (round to second decimal) 2. Find the IRR for both projects a and b. (round to secound decimal) 3. Find the PI for both projects A and B. (round to second...

A company is considering two mutually exclusive projects, the company’s required return is 8 percent and...

A company is considering two mutually exclusive projects, the company’s required return is 8 percent and they do not have any capital constraints. Based on the profitability index, what is your recommendation concerning these projects? Project A Project B Year Cash Flow Year Cash Flow 0 -$38,500 0 -$42,000 1 $20,000 1 $10,000 2 $24,000 2 $40,000 Neither project is acceptable. You should accept both projects since both of their PIs are greater than 1. You should accept project A since it has the higher PI. You should accept...

Hungry Hoagie's has identified the following two mutually exclusive projects. The required rate of the...

Hungry Hoagie's has identified the following two mutually exclusive projects. The required rate of the return for the projects is 13%. Year Cash Flow (A) Cash Flow (B) 0 ($36,800.00) ($36,800.00) 1 $19,150.00 $6,670.00 2 $14,650.00 $13,170.00 3 $12,150.00 $19,670.00 4 $9,150.00 $23,670.00 a. What is the IRR for each of these projects? Using the IRR decision rule, which project should the company accept? Is this decision necessarily correct? Calculate all values to two decimal places. b. If the...

You are considering the following two mutually exclusive projects that will not be repeated. The required...

You are considering the following two mutually exclusive projects that will not be repeated. The required rate of return is 11.25% for project A and 10.75% for project B. Which project should you accept and why? Year Project A Project B 0 -48,000 -126,900 1 18,400 69,700 2 31,300 80,900 3 11,700 0 project A; because its NPV is about $335 more than the NPV of project B project A; because it has the higher required rate of return project...

A firm has two mutually exclusive investment projects to evaluate. The projects have the following cash...

A firm has two mutually exclusive investment projects to evaluate. The projects have the following cash flows: Time Cash Flow X Cash Flow Y 0 -$90,000 -$75,000 1 35,000 30,000 2 60,000 30,000 3 70,000 30,000 4 - 30,000 5 - 10,000 Projects X and Y are equally risky and may be repeated indefinitely. If the firm’s WACC is 6%, what is the EAA of the project that adds the most value to the firm? Do not round intermediate calculations....

Mulroney Corp. is considering two mutually exclusive projects. Both require an initial investment of $10,000 at...

Mulroney Corp. is considering two mutually exclusive projects. Both require an initial investment of $10,000 at t = 0. Project X has an expected life of 2 years with after-tax cash inflows of $6,000 and $7,800 at the end of Years 1 and 2, respectively. In addition, Project X can be repeated at the end of Year 2 with no changes in its cash flows. Project Y has an expected life of 4 years with after-tax cash inflows of $4,300...

QUESTION 3 A company is considering two mutually exclusive projects, the company’s required return is 8...

QUESTION 3 A company is considering two mutually exclusive projects, the company’s required return is 8 percent and they do not have any capital constraints. Based on the profitability index, what is your recommendation concerning these projects? Project A Project B Year Cash Flow Year Cash Flow 0 -$38,500 0 -$42,000 1 $20,000 1 $10,000 2 $24,000 2 $40,000 You should only accept project B since it has the largest PI and the PI exceeds 1. You should accept both projects since both of their PIs are positive. You...

Question