solve all parts within 30 minutes The following information relates to three possiblecapital expenditure projects. Because of capitalrationing, only one project can be accepted:EPInitial cost £250,000Expected life (years)Scrap value expectedExpected cash inflowsEnd of year 123455£20,000£ProjectQ£210,0004£17,500£75,00090,00070,000 70,00065,00055,00060,00080,00055,000R£190,0005£12,000£60,00065,00070,00075,00080000The company estimates its cost of capital is 14 percent. Required: Calculate a) The payback period foreach project. b) The accounting rate of return for eachproject. c) The net present value of each project. d)Which project should be accepted - give reasons. e)Explain the factors management would need toconsider, in addition to the financial factors, beforemaking a final decision on a project.

(Note: Since we only answer up to 3 sub-parts, we’ll answer the first 3. Please resubmit the…

The following information relates to three possible capital expenditure projects. Because of capital rationing, only one project can be accepted: E Initial cost £250,000 Expected life (years) Scrap value expected Expected cash inflows. End of year 1 2 3 4 P 5 5 £20,000 £ Project Q £210,000 £190,000 4 £17,500 £ 75,000 90,000 70,000 70,000 65,000 55,000 60,000 80,000 55,000 R 5 £12,000 £ 60,000 65,000 70,000 75,000 80000 The company estimates its cost of capital is 14 per cent. Required: Calculate a) The payback period for each project. b) The accounting rate of return for each project. c) The net present value of each project. d) Which project should be accepted - give reasons. e) Explain the factors management would need to consider, in addition to the financial factors, before making a final decision on a project.

The following information relates to three possible capital expenditure projects. Because of capital rationing, only one project can be accepted: E Initial cost £250,000 Expected life (years) Scrap value expected Expected cash inflows. End of year 1 2 3 4 P 5 5 £20,000 £ Project Q £210,000 £190,000 4 £17,500 £ 75,000 90,000 70,000 70,000 65,000 55,000 60,000 80,000 55,000 R 5 £12,000 £ 60,000 65,000 70,000 75,000 80000 The company estimates its cost of capital is 14 per cent. Required: Calculate a) The payback period for each project. b) The accounting rate of return for each project. c) The net present value of each project. d) Which project should be accepted - give reasons. e) Explain the factors management would need to consider, in addition to the financial factors, before making a final decision on a project.

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

See similar textbooks

Similar questions

REQUIRED Study the information given below and calculate the Accounting Rate of Return on initial investment (expressed to two decimal places) of each project. INFORMATION The following data relate to two investment projects, only one of which may be selected: Project A Project B R R Initial capital expenditure 180 000 180 000 Net cash inflow per year: Year 1 90 000 36 000 Year 2 72 000 36 000 Year 3 54 000 86 000 Year 4 36 000 94 000 Expected scrap value (not included in the figures above) 36 000 0 Note: Depreciation is calculated using the straight-line The cost of capital is 15%. REQUIRED Use the capital asset pricing model to calculate the cost of the ordinary shares from the information provided below. INFORMATION The financial managers of Computex have…
The net present value of four projects is given below: Project W: $24,000 Project X: $ 11,000 Project Y: $20,000 Project Z: $14,000 The four projects given above require the same amount of investment. How would you rank them using net present value (NPV) method? Group of answer choices X, Z, Y, W W, X, Y, Z W, Y, Z, XX, Y, Z, W
Based on the parameters calculated, should this project goes ahead? Give your reasons for your answer. Economic Parameters Base case Project IRR Equity IRR NPV($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
Information on four investment proposals is given below: Investment Proposal A В Investment required Present value of cash inflows $ (360,000) $(50,000) $(140,000) $ (840,000) 214, 300 $ 146,900 $ 17,600 $ 74,300 $ 281,400 7 years 506,900 67,600 1,121,400 Net present value Life of the project 5 years 6 years б уears Required: 1. Compute the project profitability index for each investment proposal. (Round your answers to 2 decimal places.) 2. Rank the proposals in terms of preference.
Solve the following problems. Provide proper solutions. 1. Given the information below and 15 percent cost of capital: OUTFLOW Year1: P800,000 Year2: P800,000 Year3: P800,000 Year4: P800,000 Year5: P800,000 P2,500,000 INFLOWS (a) Compute the net present value. (b) Should the project be accepted? Why? -----
The following information relates to three potential investment projects that are being considered by Scrappit plc. Due to capital rationing, only one of the three projects can be pursued. Project A Project B Project C £ £ £ Initial cost 175,000 195,000 190,000 Expected life 5 years 5 years 5 years Scrap value expected 5,000 8,000 4,000 Expected cash inflows: End of year 1 75,000 95,000 50,000 2 65,000 65,000 60,000 3 60,000 45,000 65,000 4 55,000 45,000 66,000 5 50,000 45,000 57,000 Additional information: Scrappit plc estimates its cost of capital to be 18%. £35,000 depreciation is charged to Project A each year. £39,000 depreciation is charged to Project B each year. £38,000 depreciation is charged to Project C each year (a) Calculate the payback period, accounting rate of return and net present value of each of thepotential projects.(b) Explain which of the…
7) Consider the following project: Year Cash Flow 0 – $ 3,024 1 17,172 2 – 36,420 3 34,200 4 – 12,000 Year Cash Flow 0 -3,024 1 17,172 2 -36,420 3 34,200 4 -12,000 a) Determine the IRR (s) for this project. Do not use Excel sheet b) At which rates of return will the project be acceptable?
If a $300,000 investment has a project profitability index of 0.25, what is the netpresent value of the project?a. $75,000b. $225,000c. $25,000d. $275,000
Given the following cash flows for project X and project Y, Year Project X Project Y 0 -55000 -100000 1 20000 15000 2 13500 17000 3 11000 19000 4 10000 25000 5 9000 30000 6 7500 35000 Calculate the NPV, IRR, MIRR and traditional payback period for each project, assuming a required rate of return of 7 percent If the projects are independent, which project(s) should be selected? If they are mutually exclusive, which project should be selected? (Answer in word form please)
Consider two mutually exclusive projects, A and B, whose costs and cash flows areshown in the following table:Year Project A Project B1 $(14,000) $(22,840)2 8,000 8,0003 6,000 8,0004 2,000 8,0005 3,000 8,000Calculate the cross over rate. Please use equations and not excel
The following information is available on two mutually exclusive projects. Project Year 0 Year 1 Year 2 Year 3 Year 4 A -$700 $200 $300 $400 $500 B -$700 $600 $300 $200 $100 If the required rate of return is 10%, which project should be selected using the net present value (NPV) method? Group of answer choices A B
A project proposal requiring P840,000 initial investment will result to annual cash return as follow: Year 1 P 55,000 Year 2 P 150,200 Year 3 P 275,000 Year 4 P 350,700 Year 5 P 245,000 Year 6 P 120,400 Required: a. If the current cost of funds is 8% and the decision criteria are the net present value and discounted payback, should the project be accepted? b. The project's payback period and internal rate of return?

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

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

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

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

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS