Answered: following estimated benefit and cost.…

following estimated benefit and cost. By using NPV method, select the project and consider WACC 8% compounded quarterly. Show it with proper calculations. Project "Q"

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Question

everything is ok here

(b) Two Mutually exclusive public projects were being considered by govt. have the
following estimated benefit and cost. By using NPV method, select the project and
consider WACC 8% compounded quarterly. Show it with proper calculations.
Project "Q"
Year
1
3
2
17110 10011
5
5118
12525
9369
6610
Benefit
15437
5010
15501 9983
16781
1678
Cost
Project "P"
Year
1
2
3
4
5
13313
16215
13259
3789
698
Benefit
11221
4982
6789
9876
4323
452
Cost

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Compute for the benefit ratio of the following projects. Project cost Gross income Operating cost Life of project Interest rate O a. 1.20 O b. 1.70 O c. 1.07 O d. 1.02 5,000,000 2,000,000 1,000,000 20 years 10%
For the following projects, which project would you select, based on the Equivalent Uniform Amount analysis? Assume the projects are mutually exclusive and MARR is 15%. N (year) Project A Cash Flow($) Project B Cash Flow ($) lo 5000 5500 1 1500 1700 2300 1300 3 900 1300 4 500 1300
Based 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 0.1246
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11) The Department of Public Works has $1.1 million to allocate amongst several public projects. Data on these projects are presented in the following table: Annual benefit, Project First cost, $K $K/year Life, years 400 100 10 B 300 100 25 250 80 15 500 70 40 350 90 10 200 60 20 Using a MARR of 15%, rank the projects by their BCR, and comment on the most efficient way to allocate $1.1 million.
U3 Company is considering three long-term capital investment proposals. Each investment has a useful life of 5 years. Relevant data on each project are as follows. Capital investment Annual net income: Total Year 1 (a) 2 Project Bono 3 4 Project Edge 5 Project Bono $160,000 14,000 Project Clayton 14,000 14,000 Click here to view the factor table. 14,000 14,000 $70,000 Project Edge Project Clayton $175,000 $200,000 18,000 17,000 16,000 12,000 9,000 $72,000 Depreciation is computed by the straight-line method with no salvage value. The company's cost of capital is 15%. (Assume that cash flows occur evenly throughout the year.) years 27,000 years 23,000 Compute the cash payback period for each project. (Round answers to 2 decimal places, e.g. 10.50.) years 21,000 13,000 12,000 $96,000
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Bruin, Incorporated, has identified the following two mutually exclusive projects: Cash Flow (A) Cash Flow (6) -$ 28,000 -$ 28,000 3,900 9,300 Year 0 1 2 3 4 Project A Project B a-1 What is the IRR for each of these projects? (Do not round Intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) AN 13,400 11,300 8,700 4,600 Using the IRR decision rule, which project should the company accept? Project A Project B Ⓒ Project A O Project B Is this decision necessarily correct? 14,200 15,800 O No b- If the required return is 10 percent, what is the NPV for each of these projects? (Do 1. not round Intermediate calculations and round your answers to 2 decimal places, e.g. 32.16.) Which project will the company choose if it applies the NPV decision rule? O Project A O Project B Discount rate c. At what discount rate would the company be Indifferent between these two projects? (Do not round Intermediate calculations and enter your answer as a…

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