Which project(s) should be accepted if the required rate of return for the projects is 10 percent? Compute the NPVs and the IRRS for both projects.
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- Q8 - Consider the following two mutually exclusive projects: Year Cash Flow(X) Cash Flow(Y) 0 –$ 19,900 –$ 19,900 1 8,825 10,050 2 9,050 7,775 3 8,775 8,675 a) Calculate the NPV of Projects X and Y at discount rates of 0 %, 5 % ,10 %, 15 %, and 20%. b) Calculate the IRR for each project. c) Calculate the crossover rate for these two projects.Q5. Consider the investment projects given in the following table: Net Cash Flow n Project A Project B Project C - $100 - S150 - $10 1 30 50 410 2 50 50 -558 3 50 252 4 50 21.11% Assume that MARR = 12% in the following questions: IRR 23.24% 20%, 40%, 50% Identify simple and non-simple projects. Identify pure and mixed investments. Determine the IRR for Project C. (Hint: You can use trial-error method followed by linear interpolation.) Which project(s) is(are) acceptable? b) c) d)X construction is considering two projects to develop. The estimated net cash flow from each project is as follows:YearProject X ($)Project Y ($)1110,00075,000265,000150,0003100,00060,0004115,00055,000535,00060,000Total425,000400,000Each project requires an investment of $ 200,000. The cost of capital is 10%.Require toa) Calculate Net Present Value, Payback period, ARR and Profitability Index.b) Which Project is to be recommended to develop based on NPV, Profitability Index, Payback period and ARR? Suggest
- Comparing Investment Criteria [L01,2,3,5,7] Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 -$300,000 -$40,000 1 20,000 19,000 2 50,000 12,000 3 50,000 18,000 4 390,000 10,500 Whichever project you choose, if any, you require a 15 per cent return on your investment. a. If you apply the payback criterion, which will you choose? Why? b. If you apply the discounted payback criterion, which investment will you choose? Why? c. If you apply the NPV criterion, which investment will you choose? Why? d. If you apply the IRR criterion, which investment will you choose? Why? e. If you apply the profitability index criterion, which investment will you choose? Why? f. Based on your answers in (a) through (e), which project will you finally choose? Why? Please explain your calculations and conclusionsConsider the following two mutually exclusive projects:Year Cash Flow (X) Cash Flow (Y)0 -$365,000 -$38,0001 25,000 16,0002 65,000 12,0003 65,000 17,0004 425,000 15,000Whichever project you choose, if any, you require a 13 percent return on your investment. i. Which investment will you choose if you use the payback decision criteria? Justify your answer.ii. Which investment will you choose if you use the NPV decision criteria? Justify your answer.iii. Which project will you choose ultimately based on your answers above?Q7 - Consider the following project: 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. b) At which rates of return will the project be acceptable?
- The cash flows associated with an investment project are as follows: Project Y (200 000) 100 000 Year 100 000 120 000 110 000 The discount rate is 8 percent. What's the discount payback period of the projects? (compile a spreadsheet) Calculate NPV, PI of a projects Calculate IRR of a projects Should the firm accept the project? a) b) c) d) 01234Consider the following two mutually exclusive projects: Year Cash Flow Cash Flow B 0 -$318,844 -$27,476 1 27,700 9,057 2 56,000 10,536 3 55,000 11,849 4 399,000 13,814 The required return is 15 percent for both projects. Which one of the following statements related to these projects is correct? A. Because both the IRR and the PI imply accepting Project B, that project should be accepted.B. The profitability rule implies accepting Project A.C. The IRR decision rule should be used as the basis for selecting the project in this situation.D. Only NPV implies accepting Project A.E. NPV, IRR, and PI all imply accepting Project A.5. A choice is to be made between two competing projects which require an equal investment of ? 50,000 and are expected to generate net cash flows () as under: Year I Year II Year III Year IV Year V Year VI 25,000 15,000 10,000 Nil 12,000 6,000 PROJECT 1 PROJECT 2 10,000 12,000 18,000 25,000 8,000 4,000 0.909 0.826 0.751 0.683 0.621 0.564 Present value factor @ 10% The cost of capital of the company is 10%. Which project should be selected and why? Evaluate the project proposals using the following methods pointing out their merits and demerits: a. Pay back Period b. Net Present value method
- 17. Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B)0 −$291,000 −$41,6001 37,000 20,0002 55,000 17,6003 55,000 17,2004 366,000 14,000 a) What is the Internal Rate of Return (IRR) for each of these projects? b) Using the IRR decision rule, which project should the company accept? c) If the required return is 11 percent, what is the Net Present Value (NV) for each of these projects? d) Using the NPV decision rule, which project should the company accept? e) Why do you think the NPV and IRR rules do not agree on same project approval/rejection direction?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)Here are the cash flows for a project under consideration: C0 C1 C2 −$7,510 +$5,420 +$19,200 a. Calculate the project’s net present value for discount rates of 0, 50%, and 100%. (Round your answers to the nearest whole dollar.) b. What is the IRR of the project? (Do not round intermediate calculations. Enter your answer as a whole percent.)
