Question
In: Accounting
Monty Inc. is comparing several alternative capital budgeting projects as shown below: Projects  
Monty Inc. is comparing several alternative capital budgeting
projects as shown below:
| Projects | |||
| A | B | C | |
| Initial investment | $82000 | $122000 | $162000 |
| Present value of net cash flows | 92000 | 112000 | 202000 |
Using the profitability index, the projects rank as
C, A, B.
A, C, B.
C, B, A.
A, B, C.
Solutions
Expert Solution
Answer: C, A, B
Explanation
| 1. Computation of the project profitability index for each investment proposal. | |||
| A | B | C | |
| Present value of net cash flows | 92,000.00 | 112,000.00 | 202,000.00 |
| Initial Investment | 82,000.00 | 122,000.00 | 162,000.00 |
| Project Profitability Index | 112.20% | 91.80% | 124.69% |
| (Net Present Value / Initial Investment) | |||
| 2. Ranking the proposals in terms of preference: | |||
| A | B | C | |
| Rank | 2 | 3 | 1 |
| Explanation | |||
| Proposal C has the highest project profitability index , hence it ranks first. | |||
ekkarill92 answered 2 years agoRelated Solutions
Monty Inc. is comparing several alternative capital budgeting projects as shown below: Projects  
Monty Inc. is comparing several alternative capital budgeting
projects as shown below:
Projects
A
B
C
Initial investment
$82000
$122000
$162000
Present value of net cash
flows
92000
112000
202000
Using the profitability index, the projects rank as
C, A, B.
A, C, B.
C, B, A.
A, B, C.
The Capital Budgeting Projects She must choose one of the four capital budgeting projects listed below: ...
The Capital Budgeting Projects
She must choose one of the four capital budgeting projects
listed below:
Table 1
t
A
B
C
D
0
(19,500,000)
(21,000,000)
(16,500,000)
(18,000,000)
1
7,500,000
6,500,000
5,200,000
7,500,000
2
7,500,000
7,200,000
5,200,000
5,800,000
3
5,000,000
8,000,000
6,300,000
4,400,000
4
3,500,000
3,000,000
5,900,000
4,500,000
Risk
Average
Average
High
Low
Table 1 shows the expected after-tax operating...
True or false Capital budgeting is considering alternative projects in choosing the most profitable
True or false
Capital budgeting is considering alternative projects in
choosing the most profitable
Petram company is considering two alternative capital budgeting projects. Project A is an investment of $300,000...
Petram company is considering two alternative capital budgeting
projects. Project A is an investment of $300,000 to renovate office
facilities. Project B is an investment of $600,000 to expand
diagnostic capabilities. Relevant cash flow data for the two
projects over their expected two-year lives are as follows:
Year 1
Year 2
Pr.
Cash Flow
Pr.
Cash Flow
Project A
0.18
$ 0
0.08
$ 0
0.64
100,000
0.84
100,000
0.18
200,000
0.08
200,000
Project...
Discuss the four alternative methods for evaluating capital budgeting projects? Explain the advantages and disadvantages of...
Discuss the four alternative methods for evaluating capital
budgeting projects? Explain the advantages and disadvantages of
each method?
what are alternative capital projects?
what are alternative capital projects?
evaluate alternative capital projects
evaluate alternative capital projects
XYZ Inc., has $100 to spend on capital budgeting projects. Which combination of projects should the...
XYZ Inc., has $100 to spend on capital budgeting projects. Which
combination of projects should the company undertake? Note that
the goal is choose the combination of projects that maximizes the
firm’s value.
Project
cost
NPV
IRR
A
$30
$9
20%
B
$60
$15
13%
C
$45
$20
12%
D
$35
$13
17%
E
$25
$12
16%
a. C, A
b. C, E
c. C, E, A
d. B, C, D
The cash flows for four projects are shown below, along with the cost of capital for...
The cash flows for four projects are shown below, along with the
cost of capital for these projects. If these projects are mutually
exclusive, which one should be taken?
A.
Year: 0 1 2 3 4 5
Cash
flow: -$12,000 $4000 $4000 $4000 $4000 $4000
Cost of Capital: 5.0%
B.
Year:
0
1
2
3
4
5
Cash
flow:
-$15,000 $4000
$4000 $4000
$4000
$4000
Cost of Capital: 7.0%
C.
Year:
0
1
2
3
4
5
Cash
flow:
-$20,000 $6000
$6000 $6000
$6000
$6000
Cost of Capital: 8.2%
D.
Year:
0 ...
) The cash flows for four projects are shown below, along with the cost of capital...
) The cash flows for four projects are shown below, along with
the cost of capital for these projects. If these projects are
mutually exclusive, which one should be taken? 28) A) Year: 0 1 2 3
4 5 Cash flow: -$20,000 $6000 $6000 $6000 $6000 $6000 Cost of
Capital: 8.2% B) Year: 0 1 2 3 4 5 Cash flow: -$15,000 $4000 $4000
$4000 $4000 $4000 Cost of Capital: 7.0% C) Year: 0 1 2 3 4 5 Cash...
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