Question
In: Finance
Kaleb Konstruction, Inc., has the following mutually exclusive projects available. The company has historically used a...
Kaleb Konstruction, Inc., has the following mutually exclusive projects available. The company has historically used a three-year cutoff for projects. The required return is 10 percent.
| Year | Project F | Project G |
| 0 | −$195,000 | −$298,000 |
| 1 | 98,400 | 71,600 |
| 2 | 86,300 | 94,500 |
| 3 | 81,600 | 123,600 |
| 4 | 72,000 | 166,800 |
| 5 | 64,800 | 187,200 |
-
Calculate the payback period for both projects.
-
Calculate the NPV for both projects.
-
Which project, if any, should the company accept?
Solutions
jeff jeffy answered 1 year agoRelated Solutions
Kaleb Konstruction, Inc., has the following mutually exclusive projects available. The company has historically used a...
Kaleb Konstruction, Inc., has the following mutually exclusive
projects available. The company has historically used a three-year
cutoff for projects. The required return is 14 percent.
Year
Project F
Project
G
0
–$133,000
–$203,000
1
61,000
41,000
2
49,000
56,000
3
59,000
89,000
4
54,000
119,000
5
49,000
134,000
a.
Calculate the payback period for both projects. (Do not
round intermediate calculations and round your answers to 2 decimal
places, e.g., 32.16.)
b.
Calculate the NPV for...
King, Inc. has the following mutually exclusive projects available. The company has historically used a 4-year...
King, Inc. has the following mutually exclusive projects
available. The company has historically used a 4-year cut-off for
projects. The required return is 11 percent.
Year
Cash Flow (Project X)
Cash Flow (Project Y)
0
-$82,000
-$125,000
1
15,700
38,600
2
18,300
33,400
3
23,900
31,200
4
26,200
27,500
5
32,100
24,000
(a)
Calculate the Payback period of both projects.
(b)
State two advantages and two disadvantages of Payback period
rule?
(c)
Calculate the IRR of both projects.
(d)
Under...
Seether inc has the following two mutually exclusive projects available. What is the crossover rate for...
Seether inc has the following two mutually exclusive projects
available.
What is the crossover rate for these two projects? What is the
NPV of each project at the crossover rate?
Year Project R Project S
0
-45000
-76000
1
17000
20000
2
19000
20000
3
21000
35000
4
9000
30000
5
7000
10000
Seether, Inc., has the following two mutually exclusive projects available. Year Project R Project S 0...
Seether, Inc., has the following two mutually exclusive projects
available.
Year
Project R
Project S
0
–$
55,000
–$
76,000
1
21,000
20,000
2
22,000
20,000
3
19,000
35,000
4
12,000
30,000
5
9,000
10,000
Requirement
1:
What is the crossover rate for these two projects?
(Do not round intermediate
calculations. Enter your answer as a percentage
rounded to 2 decimal places (e.g.,
32.16).)
Internal rate of
return
%
Requirement
2:
What is the NPV of each project at...
Seether, Inc., has the following two mutually exclusive projects available. Year Project R Project S 0...
Seether, Inc., has the following two mutually exclusive projects
available.
Year
Project R
Project S
0
–$
80,500
–$
100,400
1
28,200
25,100
2
27,200
25,100
3
25,200
40,100
4
19,200
35,100
5
10,900
14,100
What is the crossover rate for these two projects? (Do
not round intermediate calculations and enter your answer as a
percent rounded to 2 decimal places, e.g., 32.16.)
Crossover rate
%
What is the NPV of each project at the crossover...
Strand Plc has the following two mutually exclusive projects available to invest in. the discount rate...
Strand Plc has the following two mutually exclusive projects
available to invest in. the discount rate is 10%. Each project can
be undertaken only once.
Cash flows
Project Initial cost Year 1 Year 2 Year 3
1 (500) 400 200 100
2 (1000) 500 400 500
Required:
(a) Calculate the payback period for each of the projects. Based
upon the payback criterion which project should be chosen?
(b) Calculate the net present value (NPV) of each...
Allergia Inc. has the following two mutually exclusive projects: Year &nb
Allergia Inc. has the following two mutually exclusive
projects:
Year
Cash Flow (A)
Cash Flow (B)
0
-$300,000
-$35,000
1
25,000
16,000
2
60,000
12,000
3
80,000
15,000
4
120,000
13,000
Whichever project you choose, if any, you require a 15 percent
return on your investment.
If you apply the payback criterion, which investment will you
choose? Why?
If you apply the NPV criterion, which investment will...
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...
Respond to the following: Parkallen Inc. has identified the following two mutually exclusive projects: Year Cash...
Respond to the following:
Parkallen Inc. has identified the following two mutually
exclusive projects:
Year
Cash Flow (A)
Cash Flow (B)
0
-$29,000
-$29,000
1
14,400
4,300
2
12,300
9,800
3
9,200
15,200
4
5,100
16,800
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?
If the required return is 11%, what is the NPV for each of these
projects? Which project will the...
Bumble’s Bees, Inc., has identified the following two mutually exclusive projects: Bumble’s Bees, Inc., has identified...
Bumble’s Bees, Inc., has identified the following two mutually
exclusive projects:
Bumble’s Bees, Inc., has identified the following two mutually
exclusive projects:
Year
Cash Flow (A)
Cash Flow (B)
0
-17,000
-17,000
1
8,000
2,000
2
7,000
5,000
3
5,000
9,000
4
3,000
9,500
Calculate the Internal Rate of Return (IRR) for each of the
project using Trial and Error method.
Apply the IRR decisionrule, which project should the company
accept?
If the required return is 11 percent, evaluate the...
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