EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN: 9781337514835
Author: MOYER
Publisher: CENGAGE LEARNING - CONSIGNMENT
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Chapter 10.A, Problem 1P
a)
Summary Introduction
To determine:
b)
Summary Introduction
To determine: Net present value of Alternative A.
c)
Summary Introduction
To determine: The best alternative.
d)
Summary Introduction
To determine: Net present value of Alternatives using equivalent annual
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Yokam Company is considering two alternative projects. Project 1 requires an initial investment of $400,000 and has a present value of
cash flows of $1,100,000. Project 2 requires an initial investment of $4,000,000 and has a present value of cash flows of $6,000,000.
1. Compute the profitability index for each project.
2. Based on the profitability index, which project should the company prefer?
Complete this question by entering your answers in the tabs below.
Required 1 Required 2
Compute the profitability index for each project.
Project 1
Project 2
Choose Numerator:
Profitability Index
T
7
Choose Denominator:
4 of 5
180
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Yokam Company is considering two alternative projects. Project 1 requires an initial investment of $400,000 and has a present value of cash flows of $1,100,000. Project 2 requires an initial investment of $4 million and has a present value of cash flows of $6 million. Compute the profitability index for each project. Based on the profitability index, which project should the company prefer? Explain.
Phoenix Company can invest in each of three cheese-making projects: C1, C2, and C3. Each project requires an initial investment of $228,000 and would yield the following annual cash flows. 1. Assuming that the company requires a 12% return from its investments, use net present value to determine which projects, if any, should be acquired. 2. Using the answer from part 1, is the internal rate of return higher or lower than 12% for Project C2?
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