A firm has only $10,000 to invest and must choose between two projects. Project A returns $12,400 after a year while project B pays $15,609 after three years. If management wants to select the investment with the higher return, which alternative should be chosen?
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A firm has only $10,000 to invest and must choose between two projects. Project A returns $12,400 after a year while project B pays $15,609 after three years. If management wants to select the investment with the higher return, which alternative should be chosen?
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- A firm has only $10,000 to invest and must choose between two projects. Project A returns $12,400 after a year while project B pays $15,609 after three years. If management wants to select the investment with the higher return, which alternative should be chosen? Calculate the return for each investment and indicate which option provides the higher return and explain why.Management is considering two alternatives. Alternative A has projected revenue per year of $100,000 and costs of $70,000 while Alternative B has revenue of $100,000 and costs of $60,000. Both projects require an initial investment of $250,000 of which $75,000 has already been set aside and will be used as a down payment on the project that is chosen. There are also other qualitative factors that management must consider before making a final choice.Required: Which of the following statements is correct about relevant costs and relevant revenues. a. The sunk cost of $75,000 is relevant b. The projected revenues are relevant to the decision c. The only relevant item are the costs as they differ between alternative d. The initial investment of $250,000, the projected revenues, and the projected costs are all relevantHoward Co. is considering two alternative investments. The payback period is 3.5 years for Investment A and 4 years for Investment B. 1. If management relies on the payback period, which investment is preferred? 2. Will an investment with a shorter payback period always be chosen over an investment with a longer payback period?
- Consider the following projects, X and Y where the firm can only choose one. Project X costs $600 and has cash flows of $400 in each of the next 2 years. Project Y also costs $600, and generates cash flows of $500 and $275 for the next 2 years, respectively. Which investment should the firm choose if the cost of capital is 15 percent? Project X, since it has a higher NPV than Project Y Project Y, since it has a higher NPV than Project X neither, since both the projects have negative NPV neither, since both the projects have positive NPVWould you accept a project where you had an initial investment of $10,000,000 but the NPV was only $10,000? Group of answer choices A. There is not enough information B.Yes, because you will make the required return each year and the NPV in additional to the required return. C. No, the NPV is too small for such a large initial investmentHeckrwee Industries is considering a project that would require an initial investment of $101,000. The project would result in cost savings of $62,000 in year 1 and $70,000 in year 2. The internal rate of return is a.between 18% and 20%. b.between 16% and 17%. c.under 15%. d.None of these choices are correct.
- A firm evaluates all its projects by applying the IRR rule. the current proposed project has a cash flow of negative 37,048 dollars, 16,850 15,700 and 19,300 for years zero to three, respectfully. The required return is 18%. what is the project IRR? should the products be accepted or rejected?You are the operations manager at a large firm looking to make a capital investment in a futureproject. Your company is considering two project investments. Project A’s payback period is 3years, and Project B’s payback period is 5.5 years.Your company requires a payback period of no more than 5 years on such projects.a. Which project should they further consider? Why?b. Is there an argument that can be made to advance either project or neither project? Why?c. What other factors might be necessary to make that decision?Jefferson International is trying to choose between the following two mutually exclusive design projects: Cash Flow (B) -$38,000 Year Cash Flow (A -$75,000 32.400 17,800 30,200 14,200 3 36.600 19.800 The required return is 12 percent. If the company applies the profitability index (PI) decision rule, which project should the firm accept? If the company applies the NPV decision rule, which project should it take? Given your first two answers, which project should the firm actually accept? Project A; Project B; Project A O Project A; Project B; Project B O Project B; Project A; Project A O Project B; Project A; Project B O Project B; Project B, Project B
- Consider the following projects, X and Y where the firm can only choose one. Project X costs $600 and has cash flows of $400 in each of the next 2 years. Project Y also costs $600, and generates cash flows of $500 and $275 for the next 2 years, respectively. Sketch a net present value profile for each of these projects. Which project should the firm choose if the cost of capital is 10 percent? What if the cost of capital is 25 percent? Show all work.As an staff at company, you are considering two projects which project A has an initial investment of $100,000 and yearly revenue of $17, 600 for 10 years, and Project B has an initial investment of $51,000 and yearly revenue of $10, 100 for 10 years. What is the point of indifference? Which project would you accept at a WACC of 16.0%? a) Point of indifference does not exist, accept project B b)Point of indifference at 8.60%, accept both Project A and Project B c) Point of indifference at 8.60%, don't accept Project A and don't accept ProjectB d) Point of indifference at 14.84%, accept Project B. e) Point of indifference at 11.86%, accept Project B f)Point of indifference at 11.86%, accept Project AA firm evaluates all of its projects by applying the NPV decision rule. A project under consideration has the following cash flows: Year Cash Flow 0 –$ 28,900 1 12,900 2 15,900 3 11,900 What is the NPV for the project if the required return is 11 percent? At a required return of 11 percent, should the firm accept this project? What is the NPV for the project if the required return is 25 percent?