Question
In: Finance
Calculate the net present value (NPV) for both projects usingthe crossover rate as your discount...
Use the following information to answer the next three questions.
Consider the cash flows from two mutually exclusive projects:
Cash Flow
| Year | Project A | Project B |
|---|---|---|
| 0 | -$420,000 | -$420,000 |
| 1 | $140,000 | $400,000 |
| 2 | $230,000 | $110,000 |
| 3 | $331,000 | $140,000 |
The appropriate discount rate is 8.5%.
Calculate the net present value (NPV) for both projects using the crossover rate as your discount rate. Round both NPVs to the nearest dollar.
Solutions
Expert Solution
NPV = Present Value of Cash Inflow - PV of Cash Outflow
Project A
Present Value of Cash Inflow = 
= 
= 583549.55
NPV = 583549.55 - 420,000 = 163549.55
Project B
Present Value of Cash Inflow =
= 
= 571710.81
NPV = 571710.81 - 420,000 = 151710.81
jeff jeffy answered 2 years agoRelated Solutions
1. Calculate the net present value (NPV) for both projects, anddetermine which project should be...
Use the following information to answer the next three questions. Consider the cash flows from two mutually exclusive projects: YearProject AProject B0-$420,000-$420,0001$140,000$400,0002$230,000$110,0003$331,000$140,000The appropriate discount rate is 8.5%.1. Calculate the net present value (NPV) for both projects, and
determine which project should be accepted based on NPV. Round both
NPVs to the nearest dollar.2. Calculate the internal rate of return (IRR) for both
projects, and determine which project should be accepted based on
IRR.3. Calculate the net present value (NPV) for both projects...
Using a discount rate of 14 percent, calculate the net present value (NPV) of the proposed investment.
Beacon Company is considering automating its production facility. The initial investment in automation would be $9.40 million, and the equipment has a useful life of 8 years with a residual value of $1,000,000. The company will use straight-line depreciation. Beacon could expect a production increase of 38,000 units per year and a reduction of 20 percent in the labor cost per unit.
Current (no automation)
Proposed (automation)
77,000 units
115,000 units
Production and sales volume
Per Unit
Total...
The relationship between a Net Present Value (NPV) and a discount rate could best be described...
The relationship between a Net Present Value (NPV) and a
discount rate could best be described as?
Direct
Random
Stochastic
Indirect
Indeterminant
Use both the NET present value (NPV) and the Internal Rate of return (IRR) to assess...
Use both the NET present value (NPV) and the Internal Rate of
return (IRR) to assess and draw conclusions when advising a company
which is wondering whether to K18 000 on an item of equipment in
order to obtain cash profits as shown below
Year
K
1
6000
2
8000
3
5000
4
1000
Note: The company requires a return of 10% per annum.
Considering discount rate of 14%, calculate NPV, Benefit Cost Ratio, and Present Value Ratio for the...
Considering discount rate of 14%, calculate NPV, Benefit Cost
Ratio, and Present Value Ratio for the following investment and
explain if it is a good investment.
C=10,000
C=8,000
C=6,000
I=7,500
I=7,500
...
I=7,500
L=10,000
0
1
2
3
4
...
10
C: Cost, I:Income, L: Salvage value
11-2: Net Present Value (NPV) 11-7: NPV Profiles NPV Your division is considering two projects with...
11-2: Net Present Value (NPV)
11-7: NPV Profiles
NPV
Your division is considering two projects with the following
cash flows (in millions):
0
1
2
3
Project A
-$27
$13
$17
$8
Project B
-$25
$14
$11
$2
What are the projects' NPVs assuming the WACC is 5%? Round your
answer to two decimal places. Enter your answer in millions. For
example, an answer of $10,550,000 should be entered as 10.55.
Project A $ million
Project B $ million
What are the projects' NPVs...
The NPV (net present value) of Plan Alpha is $ (130,539) The NPV (net present value)...
The
NPV (net present value) of Plan Alpha is $
(130,539)
The
NPV (net present value) of Plan Beta is $
233,001
The
IRR (internal rate of return) of Plan Alpha is $
19.36
%.
The
IRR (internal rate of return) of Plan Beta is $
21.25
%.
Which plan, if
any, should
the company pursue?
Based on the results above, the company
should pursue
Plan Beta
because
the NPV is
positive
and
the IRR is
greater than
the
company's...
Calculate the (a) net present value (NPV), (b) profitability index (PI), and (c) internal rate of...
Calculate the (a) net present value (NPV),
(b) profitability index (PI), and
(c) internal rate of return (IRR) for Projects
1 and 2 (cash flows shown below), assuming a required return of
13%.
Year
Project 1
Project 2
0
-$390
−$420
1
$130
$130
2
$150
$140
3
$130
$150
4
$360
$310
a. What is the NPV of Project 1? $___
(Round to the nearest cent.) What is the NPV of Project 2?
$___ (Round to the nearest...
Calculate the (a) net present value (NPV), (b) profitability index (PI), and (c) internal rate of...
Calculate the (a) net present value (NPV), (b)
profitability index (PI), and (c) internal rate of return (IRR)
for Projects 1 and 2 (cash flows shown below), assuming a
required return of 14 %. Year 0 project 1 -440 project 2 -420 Year
1 P1 190 P2 150 Year 2 P1 120 P2 150 Year 3 P1 140 P2 190 Year 4 P1
320 P2 330
Net present value (NPV)The net present value (NPV) rule is considered one of the most...
Net present value (NPV)The net present value (NPV) rule is considered one of the most
common and preferred criteria that generally lead to good
investment decisions.Consider this case:Suppose Pheasant Pharmaceuticals is evaluating a proposed
capital budgeting project (project Beta) that will require an
initial investment of $2,225,000. The project is expected to
generate the following net cash flows:YearCash FlowYear 1$275,000Year 2$475,000Year 3$450,000Year 4$450,000Pheasant Pharmaceuticals’s weighted average cost of capital is
8%, and project Beta has the same risk as the...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- Discuss the difference between a)FAT, FAT32, NTFS, CDFS, etc., b)What make them diferent and why they...
- 2. Given the Instruction sets for Machine-1, Machine-2 and Machine-3, write programs to calculate: P= ((B×C)...
- Problem III. Suppose that, in a market of a certain good, there are firms that are...
- discusses the difference between public relations and advertising. Cite an organization or individual and give one...
- Draw a sketch for the Hydrogen (discrete) spectrum, labeling the lines according to their respective quantum...
- Create a program/function using PYTHON that takes cents and returns to the customer how MANY coins...
- You have been asked to design an elevator system. The functions of an elevator includes moving...
ADVERTISEMENT