Question
In: Finance
Projects A and B, of equal risk, are alternatives for expanding Rosa Company's capacity. The firm's...
Projects A and B, of equal risk, are alternatives for expanding Rosa Company's capacity. The firm's cost of capital is 13%.
The cash flows for each project are shown in the following table: .
a. Calculate each project's payback
period.
b. Calculate the net present value (NPV) for each project.
c. Calculate the internal rate of return (IRR) for each project.
d. Indicate which project you would recommend.
Initial investment $160,000
$130,000
Year Cash inflows
1 $40,000 $40,000
2 $45,000 $40,000
3 $50,000 $40,000
4 $55,000 $40,000
5 $60,000 $40,000
Solutions
jeff jeffy answered 1 year agoRelated Solutions
Projects A and? B, of equal? risk, are alternatives for expanding Rosa? Company's capacity. The? firm's...
Projects A and? B, of equal? risk, are alternatives for
expanding Rosa? Company's capacity. The? firm's cost of capital is
11?%.
The cash flows for each project are shown in the following?
table:
Project A
Project B
Initial investment
?(CF
0CF0?)
?$130,000
?$100,000
Year
?(t?)
Cash inflows
?(CF Subscript
tCFt?)
1
?$30,000
?$30,000
2
?$35,000
?$30,000
3
?$40,000
?$30,000
4
?$45,000
?$30,000
5
?$50,000
?$30,000
a.??Calculate each? project's payback
period.
b.??Calculate the net present value?
(NPV) for each project.
c.??Calculate...
Projects A and B, both of equal risk, are mutually exclusive alternatives for expanding Corporation’s capacity....
Projects A and B, both of equal risk,
are mutually exclusive alternatives for expanding
Corporation’s capacity. The firm’s cost of capital is 13%. The cash
flows for each project are shown in the following table.
Project
A
Project B
Year
0:
($80,000)
Year
0:
($80,000)
Year
1:
$15,000
Year
1:
$15,000
Year
2:
$20,000
Year
2:
$15,000
Year
3:
$25,000
Year
3:
$15,000
Year
4:
$30,000
Year
4:
$35,000
Year
5:
$30,000 ...
Projects A and B, both of equal risk, are mutually exclusive alternatives for expanding Corporation’s capacity....
Projects A and B, both of equal risk, are mutually exclusive
alternatives for expanding Corporation’s capacity. The firm’s
cost of capital is 13%. The cash flows for each project are shown
in the following table.
Project
A Project
B
Year
0:
($80,000)
Year
0:
($80,000)
Year
1:
$15,000
Year
1:
$15,000
Year
2:
$20,000
Year
2:
$15,000
Year
3:
$25,000
Year
3:
$15,000
Year
4:
$30,000
Year
4:
$35,000
Year
5:
$30,000
Year
5: ...
The following two projects of equal risk are mutually exclusive alternatives for expanding the firm’s capacity....
The following two projects of equal risk are mutually exclusive
alternatives for expanding the firm’s capacity. The firm’s cost of
capital is 15%. The cash flows for each project are given in the
following table.
Year Project A Project B
0 210,000 20,000
1 15,000 12,000
2 30,000 10,500
3 32,000 9,500
4 425,000 8,200
Required:
a) Calculate each project’s payback period. Using the payback
period criterion which project is preferable? b)
Calculate the net present value for each project....
The following two projects of equal risk are mutually exclusive alternatives for expanding the firm’s capacity....
The
following two projects of equal risk are mutually exclusive
alternatives for expanding the firm’s capacity. The firm’s cost of
capital is 15%. The cash flows for each project are given in the
following table.
PROJECT A
PROJECT B
Initial investment
210,000
20,000
Year
Net cash inflows
Net cash inflows
1
15,000
12,000
2
30,000
10,500
3
32,000
9,500
4
425,000
8,200
Sapphire Project and Jade Project of equal risk are alternative for expanding Sinaran Company Capacity. The...
Sapphire Project and Jade Project of equal risk are alternative
for expanding Sinaran Company Capacity. The firms cost of capital
is 13%. The initial investment and cash flows associated with these
projects are shown in the following table.
Initial Investment (CF0)
Sapphire Project
Jade Project
RM80,000
RM50,000
Year (t)
Cash inflows (CFt)
RM
0
-365,000
-40,000
1
38,000
20,300
2
47,000
15,200
3
62,000
14,100
4
455,000
11,200
Calculate the payback period for each project. Which investment
will you choose?...
Nihau Tech has equal amounts of low-risk, average-risk, and high-risk projects. The firm's overall WACC is...
Nihau Tech has equal amounts of low-risk, average-risk, and
high-risk projects. The firm's overall WACC is 11%. The CFO, Ms
Chen, believes that this is the correct WACC for the company's
average-risk projects, but that a lower rate should be used for
lower-risk projects and a higher rate for higher-risk projects. The
CEO, Mr. Wu, disagrees, on the grounds that even though projects
have different risks, the WACC used to evaluate each project should
be the same because the company...
All techniques with NPV profile Mutually exclusive projects Projects A and B, of equal risk, are...
All techniques with NPV profile Mutually exclusive
projects Projects A and B, of equal risk, are alternatives for
expanding Rosa Company's capacity. The firm's cost of capital is
16%. The cash flows for each project are shown in the following
table:
Initial investment $130,000
$100,000
Year Cash inflows
1 $30,000 $30,000
2 $35,000 $30,000
3 $40,000 $30,000
4 $45,000 $30,000
5 $50,000 $30,000
a. Calculate each project's payback
period.
b. Calculate the net present value (NPV) for each project.
c. ...
A firm is considering three capacity alternatives: A, B, and C. Alternative A would have an...
A firm is considering three capacity alternatives: A, B, and C.
Alternative A would have an annual fixed cost of $100,000 and
variable costs of $22 per unit. Alternative B would have annual
fixed costs of $120,000 and variable costs of $20 per unit.
Alternative C would have fixed costs of $80,000 and variable costs
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A) Which alternative has the lowest break-even quantity?
B) Which alternative will produce...
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B&B Technologies is considering expanding its operations to
include production and sales of high capacity storage devices. The
assistant to the CFO has collected a lot of information which is
described below. Unfortunately, some of the information may be of
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asked to present a net present value based analysis to help
management decide on the desirability of getting into the storage
device business. The company owns a vacant building...
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