19-22: Three mutually exclusive investment projects are to be compared for their economic feasibility, and one of them has to be chosen. Their cash flows are shown in table below. Using an MARR of 10%, IRR analysis, and a planning horizon of 5 years, answer the following questions. Initial investment, SR 20,000 25,000 16,000 Annual revenue, SR 8,000 9,500 7,000 Project
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- Consider the following cash flows for two mutually exclusive capital investment projects. The required rate of return is 16%. Use this information for the next 3 questions. Year Project A Cash Flow Project B Cash Flow ($50,000) ($20,000) 1 15,000 6,000 15,000 6,000 15,000 6,000 4 13,500 5,400 13,500 5,400 6,750 5,400 What is the profitability index of project B? 1.03 1.06 .94 1.01 1.09Consider the following two mutually exclusive projects:Year Cash Flow (X) Cash Flow (Y)0 -$365,000 -$38,0001 25,000 16,0002 65,000 12,0003 65,000 17,0004 425,000 15,000Whichever project you choose, if any, you require a 13 percent return on your investment. i. Which investment will you choose if you use the payback decision criteria? Justify your answer.ii. Which investment will you choose if you use the NPV decision criteria? Justify your answer.iii. Which project will you choose ultimately based on your answers above?Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) -$ 15,456 5,225 8,223 13,013 8,705 0 1 234 -$ 276,363 26,400 51,000 57,000 402,000 Whichever project you choose, if any, you require a 6 percent return on your investment. a. What is the payback period for Project A? Payback period b. What is the payback period for Project B? Payback period c. What is the discounted payback period for Project A? Discounted payback period
- Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 –$ 491,000 –$ 92,000 1 114,000 52,000 2 134,000 36,000 3 79,000 33,500 4 474,000 28,600 Whichever project you choose, if any, you require a 15% return on your investment. What is the IRR for each project? (Round the final answers to 2 decimal places.) If you apply the IRR criterion, which investment will you choose? Project A Project B What is the profitability index for each project? (Do not round intermediate calculation. Round the final answers to 3 decimal places.) Project A Project B If you apply the profitability index criterion, which investment will you choose? Project A Project B Based on your answers in (a) through (e), which project will you finally choose? Project A Project BConsider the following two mutually exclusive projects: YEAR CASH FLOW (A) CASH FLOW (B)0 -$300,000 -$39,0001 20,000 18,0002 70,000 12,0003 80,000 18,0004 400,000 19,000 Whichever project you choose, if any, you require a 15 percent return on your investment.i) If you apply the payback period (PBP) criterion, which investment will you choose? Why?ii) If you apply the net present value (NPV) criterion, which investment will you choose? Why?iii) If you apply the profitability index (PI) criterion, which investment will you choose? Why?iv) If you apply the internal rate of return (IRR) criterion, which investment will you choose?Why?v) Based on your answers in (i) through (iv), which project will you finally…Two mutually exclusive investment projects have the following forecasted cash flows: Year A B 0 -$25,000 -$25,000 1 +10,000 0 2 +10,000 0 3 +10,000 0 4 +10,000 +50,000 Use Table II and Table IV to answer the questions. Compute the internal rate of return for each project. Round your answers to one decimal place.IRRA: % IRRB: % Compute the net present value for each project if the firm has a 9 percent cost of capital. Round your answers to the nearest dollar.NPVA: $ NPVB: $ Which project should be adopted? Why?should be chosen because it has the higher . It is assumed that the firm's reinvestment opportunities are more accurately represented by the .
- Two mutually exclusive investment projects have the following forecasted cash flows: Year A B 0 -$20,000 -$20,000 1 +11,000 0 2 +11,000 0 3 +11,000 0 4 +11,000 +55,000 Use Table II and Table IV to answer the questions. Compute the internal rate of return for each project. Round your answers to one decimal place.IRRA: % IRRB: % Compute the net present value for each project if the firm has a 10 percent cost of capital. Round your answers to the nearest dollar.NPVA: $ NPVB: $ Which project should be adopted? Why? should be chosen because it has the higher . It is assumed that the firm's reinvestment opportunities are more accurately represented by the .Determine which of the following independent projects should be selected for investment if a maximum of $240,000 is available and the MARR is 10% per year. Use the PW method to evaluate mutually exclusive bundles to perform your analysis. Construct the cash flow diagram for each. Investment, Net Cash Flow, $ per year Life, Project years S -100,000 50,000 8 M -125,000 24,000 8 A -120,000 75,000 8. -220,000 39,000 8 -200,000 82,000 8.b) Following data relate to five independent investment projects : Initial Outlay Projects P ORST 1,000,000 240,000 184,000 11,500 80,000 Annual Cash Inflows Life in Years 250,000 24,000 30,000 4,000 12,000 8 15 20 5 10 Page 2 of 3 Assume a 10% required rate of return and a 50% tax rate. Rank these five investment projects according to each of the following criteria: (i) Pay-back Period. (ii) Accounting Rate of Return. (iii) Net Present Value Index. (iv) Internal Rate of Return.
- Consider the following cash flows for two mutually exclusive capital investment projects. The required rate of return is 16%. Use this information for the next 3 questions. Year Project A Cash Flow Project B Cash Flow ($50,000) ($20,000) 15,000 6,000 15,000 6,000 3 15,000 6,000 4 13,500 5,400 13,500 5,400 6,750 5,400Based on the parameters calculated, should this project goes ahead? Give your reasons for your answer. Economic Parameters Base case Project IRR Equity IRR NPV($millions)@12% Capital Expenditure($million) PayBack period (Year) WACC (Based on 75/25) 13.68 15.89 9,172,880 (85,000,000) 8.92 0.1246Consider two investments A and B with the following sequences of cash flows: Net Cash Flow n Project A Project B 0 -$120,000 -$100,000 1 20,000 15,000 2 20,000 15,000 3 120,000 130,000 (a) Compute the IRR for each investment. (b) At MARR = 15%, determine the acceptability of each project. (c) If A and B are mutually exclusive projects, which project would you select, based on the rate of return on incremental investment?