PROVIDE SOLUTION PLS.THANK YOU! 7. A firm with a 14% cost of capital is evaluating two projects for this year's capitalbudget. After tax cash flows, including depreciation, are as follows:12310,000Project MProject J-P30,000-P90,00010,00035,00010,00035,00035,000a. Calculate NPV, IRR, payback for each project.b. Assuming the projects are independent, which one(s) would yourecommend?c. If the projects are mutually exclusive, which would you recommend?

The capital budgeting decision refers to the selection of the best capital asset or project that…

7. A firm with a 14% cost of capital is evaluating two projects for this year's capital budget. After tax cash flows, including depreciation, are as follows: -P30,000 10,000 35,000 10,000 10,000 Project M Project J -P90,000 35,000 35,000 a. Calculate NPV, IRR, payback for each project. b. Assuming the projects are independent, which one(s) would you recommend? c. If the projects are mutually exclusive, which would you recommend?

7. A firm with a 14% cost of capital is evaluating two projects for this year's capital budget. After tax cash flows, including depreciation, are as follows: -P30,000 10,000 35,000 10,000 10,000 Project M Project J -P90,000 35,000 35,000 a. Calculate NPV, IRR, payback for each project. b. Assuming the projects are independent, which one(s) would you recommend? c. If the projects are mutually exclusive, which would you recommend?

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter12: Capital Budgeting: Decision Criteria

Section: Chapter Questions

Problem 10P: Project S has a cost of $10,000 and is expected to produce benefits (cash flows) of $3,000 per year...

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Project S has a cost of $10,000 and is expected to produce benefits (cash flows) of $3,000 per year for 5 years. Project L costs $25,000 and is expected to produce cash flows of $7,400 per year for 5 years. Calculate the two projects’ NPVs, IRRs, MIRRs, and PIs, assuming a cost of capital of 12%. Which project would be selected, assuming they are mutually exclusive, using each ranking method? Which should actually be selected?
Financial Manager of Agusta Company is considering two projects (project A and project H), which have cash flows as follows: Year Cash Flow of Project A (in $) Cash Flow of Project H (in $) 0 -100 -100 1 10 70 2 60 50 3 80 20 Agusta Company’s cost of capital is 10 percent. Calculate payback, NPV, IRR, and MIRR for both projects.
Assume you are evaluating two mutually exclusive projects, the cash flows of which appear below and that your company uses a cost of capital of 13% to evaluate projects such as these. Time Project A Cash Flows Project B Cash Flows 0 -$46,800 -$63,600 1 -21,600 20,400 2 43,200 20,400 3 43,200 20,400 4 43,200 20,400 5 -28,800 20,400 Calculate the payback period and discounted payback period for projects A & B. Calculate the IRR and MIRR of projects A & B. Assume a reinvestment rate of 13% for the calculation of MIRR. Sketch the NPV profile for projects A & B. Determine the crossover point for these projects’ NPV profiles. Assuming a cost of capital of 14%, which of these projects should be accepted? Under what conditions on the cost of capital should project B be preferred to project A? If Project A and Project B are independent, which project should be undertaken?
Part B: Solve the following excersises: 1. A company is considering two mutually exclusive projects X and Y. Each require an initial investment of OMR 100,000.The after tax cash inflows associated with each project are as follows: Year Project X Cash flows Project Y Cash flows (Initial Investment) 120,000 120,000 25,000 20,000 2 ? ? 3 ? ? ? ? 5 ? ? (a) Complete the table where Payback period for Project X is 3.5 and for project Y is 4. (b) Which project is better?
Assume you are evaluating two mutually exclusive projects, the cash flows of which appear below and that your company uses a cost of capital of 13% to evaluate projects such as these. Time Project A Cash Flows Project B Cash Flows 0 -$46,800 -$63,600 1 -21,600 20,400 2 43,200 20,400 3 43,200 20,400 4 43,200 20,400 5 -28,800 20,400 Calculate the payback period and discounted payback period for projects A & B. Calculate the IRR and MIRR of projects A & B. Assume a reinvestment rate of 13% for the calculation of MIRR. Sketch the NPV profile for projects A & B. Determine the crossover point for these projects’ NPV profiles. Assuming a cost of capital of 14%, which of these projects should be accepted? Under what conditions on the cost of capital should project B be preferred to project A? If Project A and Project B are independent, which project should be undertaken? PLEASE ANSWER THE ONES IN BOLD (4,5,6)
Assume two mutually exclusive projects have the estimated net incremental after-tax cash flows shown below. The company's required rate of retun is 12%. For each project, compute a) the net present value, b) intemal rate of return, c) profitability index and d) the payback period. e) State which project should be chosen and why Project A Initial investment Annual after-tax cash flows Year 1 Year 2 Year 3 Year 4 Year 5 $100,000 $150,000 39,000 39,000 39,000 39,000 39,000 39,000 20,000 30,000 40,000 50,000 60,000 Year 6
Assume you are evaluating two mutually exclusive projects, the cash flows of which appear below and that your company uses a cost of capital of 13% to evaluate projects such as these. Time Project A Cash Flows Project B Cash Flows 0 -$46,800 -$63,600 1 -21,600 20,400 2 43,200 20,400 3 43,200 20,400 4 43,200 20,400 5 -28,800 20,400 Calculate the payback period and discounted payback period for projects A & B. Calculate the IRR and MIRR of projects A & B. Assume a reinvestment rate of 13% for the calculation of MIRR. Sketch the NPV profile for projects A & B. Determine the crossover point for these projects’ NPV profiles. Assuming a cost of capital of 14%, which of these projects should be accepted? Under what conditions on the cost of capital should project B be preferred to project A? If Project A and Project B are independent, which project should be undertaken? PLEASE ANSWER THE ONE IN BOLD (7)
Case 1: Assume you are evaluating two mutually exclusive projects,the cash flows of which appear below, and that your company uses a cost of capital of 8 percent to evaluate projects such as these. Time Project A Cash Flow Project B Cash Flow 0 -$650 -$700 1 100 300 2 250 -200 3 250 550 4 200 200 5 100 80 a. Calculate the payback of Project A. b. Calculate the discounted payback of Project A. c. Calculate the IRR of Project A. d. Using the NPV method and assuming a cost of capital of 8 percent, which of these projects should be accepted?
Assume you are evaluating two mutually exclusive projects, the cash flows of which appear below and that your company uses a cost of capital of 13% to evaluate projects such as these. Time Project A Cash Flows Project B Cash Flows 0 -$46,800 -$63,600 1 -21,600 20,400 2 43,200 20,400 3 43,200 20,400 4 43,200 20,400 5 -28,800 20,400 Sketch the NPV profile for projects A & B. Determine the crossover point for these projects’ NPV profiles.
Mooradian Corporation estimates that its weighted average cost of capital is 14.2 percent. The company is considering two mutually exclusive projects whose after-tax cash flows are as follows: Year 0 1 2 Project S CF ($3,263) $1,403 $2,806 $3,304 $977 ($961) What is the modified internal rate of return (MIRR) of the project with the highest NPV? Should this project be accepted? 3 4 33.93%; Yes 35.93%; Yes O 32.93%; No 31.93%; No Project L CF ($4,546) $3,896 $2,373 $2,041 30.93%; No
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K.Broni Company is considering two mutually exclusive investments. Project P and Project The expected cash flows of these projects are as follows: Year Project (P) Project (Q) ($) ($) 0 (1,000) (1,600) 1 (1,200) 200 2 (600) 400 3 (250) 600 4 2,000 800 5 4,000 100 (a) Which project would you choose if the cost of capital is 10 percent? 20 percent? (b) Critically examine the superiority and…