Question

Need BOLD areas answered. Gardial Fisheries is considering two mutually exclusive investments. The projects' expected net...

Need BOLD areas answered.

Gardial Fisheries is considering two mutually exclusive investments. The projects' expected net cash flows are as follows:
Expected Net Cash Flows
Time Project A Project B
0 ($375) ($575)
1 ($300) $190
2 ($200) $190
3 ($100) $190
4 $600 $190
5 $600 $190
6 $926 $190
7 ($200) $0
f.   What is the regular payback period for these two projects?
Project A
Time period 0 1 2 3 4 5 6 7
Cash flow (375) (300) (200) (100) 600 $600 $926 ($200)
Cumulative cash flow -$375 -$675 -$875 -$975 -$375 $225 $1,151 $951
Intermediate calculation for payback
Payback using intermediate calculations 4.625
Project B
Time period 0 1 2 3 4 5 6 7
Cash flow -$575 $190 $190 $190 $190 $190 $190 $0
Cumulative cash flow -$575 -$385 -$195 -$5 $185 $375 $565 $565
Intermediate calculation for payback
Payback using intermediate calculations 3.026
g.    At a cost of capital of 12%, what is the discounted payback period for these two projects?
WACC   = 12%
Project A
Time period 0 1 2 3 4 5 6 7
Cash flow -$375 -$300 -$200 -$100 $600 $600 $926 -$200
Disc. cash flow -$375 -$268 -$159 -$71 $381 $340 $469 -$90
Disc. cum. cash flow -$375 -$643 -$802 -$873 -$492 -$152 $317 $227
Intermediate calculation for payback
Payback using intermediate calculations 5.400
Project B
Time period 0 1 2 3 4 5 6 7
Cash flow -$575 $190 $190 $190 $190 $190 $190 $0
Disc. cash flow -$575 $170 $151 $135 $121 $108 $96 $0
Disc. cum. cash flow -$575 -$405 -$254 -$119 $2 $110 $206 $206
Intermediate calculation for payback
Payback using intermediate calculation
Discounted Payback using PERCENTRANK Ok because cash flows follow normal pattern.
Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

g.A

Time period: 0 1 2 3 4 5 6 7
Cash flow: (375) (300) (200) (100) 600 $600 $926 ($200)
Disc. cash flow: (375) (268) (159) (71) 381 340 469 (90)
Disc. cum. cash flow: (375) (643) (802) (873) (492) (152) 317 227
% of year required for payback: 100.0000 100.0000 100.0000 100.0000 100.0000 100.0000 32.4000
Discounted Payback: 5.32 yrs
Time period: 0 1 2 3 4 5 6 7
Cash flow: (575) 190 190 190 190 $190 $190 $0
Disc. cash flow: (575) 170 151 135 121 108 96 0
Disc. cum. cash flow: (575) (405) (254) (119) 2 110 206 206
% of year required for payback: 100.0000 100.0000 100.0000 100.0000 98.3000
Discounted Payback: 3.98 yrs
0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Gardial Fisheries is considering two mutually exclusive investments. The projects' expected net cash flows are as...
Gardial Fisheries is considering two mutually exclusive investments. The projects' expected net cash flows are as follows: Expected Net Cash Flows Time Project A Project B 0 ($375) ($575) 1 ($300) $190 2 ($200) $190 3 ($100) $190 4 $600 $190 5 $600 $190 6 $926 $190 7 ($200) $0 a. If each project's cost of capital is 12%, which project should be selected? If the cost of capital is 18%, what project is the proper choice? @ 12% cost...
Show formula (how did you calculate the answer) and answer for Dis Cumulative Cash Flow and...
Show formula (how did you calculate the answer) and answer for Dis Cumulative Cash Flow and immediate calc for payback g.    At a cost of capital of 12%, what is the discounted payback period for these two projects? WACC   = 12% Project A Time period 0 1 2 3 4 5 6 7 Cash flow -$375 -$300 -$200 -$100 $600 $600 $926 -$200 Disc. cash flow -$375 -$268 -$159 -$71 $381 $340 $469 -$90 Disc. cum. cash flow Intermediate calculation for payback...
1.      Suppose your firm is considering two mutually exclusive, required projects with the cash flows shown...
1.      Suppose your firm is considering two mutually exclusive, required projects with the cash flows shown as follows. The required rate of return on projects of both of their risk class is 10 percent, and the maximum allowable payback and discounted payback statistic for the projects are two and a half and three and a half years, respectively. Time 0 1 2 3 Project A Cash Flow ?1,000 300 400 700 Project B Cash Flow ?500 200 400 300 Use...
NPV and IRR Analysis Cummings Products Company is considering two mutually exclusive investments whose expected net...
NPV and IRR Analysis Cummings Products Company is considering two mutually exclusive investments whose expected net cash flows are as follows: EXPECTED NET CASH FLOWS Year Project A Project B 0 -$300 -$405 1 -387 134 2 -193 134 3 -100 134 4 600 134 5 600 134 6 850 134 7 -180 134 What is each project's MIRR at a cost of capital of 10%? (Hint: Consider Period 7 as the end of Project B's life.) Do not round...
Suppose your firm is considering two mutually exclusive, required projects with the cash flows shown below....
Suppose your firm is considering two mutually exclusive, required projects with the cash flows shown below. The required rate of return on projects of both of their risk class is 10 percent, and the maximum allowable payback and discounted payback statistic for the projects are 2.5 and 3.5 years, respectively.   Time: 0 1 2 3   Project A Cash Flow -1,000 300 400 700   Project B Cash Flow -500 200 400 300 Use the payback decision rule to evaluate these projects;...
Cummings Products Company is considering two mutually exclusive investments whose expected net cash flows are as...
Cummings Products Company is considering two mutually exclusive investments whose expected net cash flows are as follows: EXPECTED NET CASH FLOWS Year Project A Project B 0 -$320 -$360 1 -387 134 2 -193 134 3 -100 134 4 600 134 5 600 134 6 850 134 7 -180 134 What is each project's IRR? Do not round intermediate calculations. Round your answers to two decimal places Calculate the two projects' NPVs, if you were told that each project's cost...
1.      Suppose your firm is considering two mutually exclusive, required projects with the cash flows shown...
1.      Suppose your firm is considering two mutually exclusive, required projects with the cash flows shown as follows. The required rate of return on projects of both of their risk class is 10 percent, and the maximum allowable payback and discounted payback statistic for the projects are two and a half and three and a half years, respectively. Time 0 1 2 3 Project A Cash Flow ?1,000 300 400 700 Project B Cash Flow ?500 200 400 300 Use...
1.      Suppose your firm is considering two mutually exclusive, required projects with the cash flows shown...
1.      Suppose your firm is considering two mutually exclusive, required projects with the cash flows shown as follows. The required rate of return on projects of both of their risk class is 10 percent, and the maximum allowable payback and discounted payback statistic for the projects are two and a half and three and a half years, respectively. Time 0 1 2 3 Project A Cash Flow ?1,000 300 400 700 Project B Cash Flow ?500 200 400 300 Use...
Capital Budgeting BioMed Engineering is considering two mutually exclusive investments. The projects' expected net cash flows...
Capital Budgeting BioMed Engineering is considering two mutually exclusive investments. The projects' expected net cash flows are as follows:                                                                                                                               Expected Net Cash Flows                                                                                                Time     Project A          Project B                                                                                    0          ($405)                ($705)                                                                            1          ($285)              $200                                                                              2          ($205)              $205                                                                              3          ($105)              $210                                                                              4          $605                 $215                                                                              5          $650                 $220                                                                              6          $925                 $225                                                                              7          ($200)              $230                                                                  In your report, identify which project would be selected (assuming they are mutually exclusive) for each investment criterion. Note that cash outflows (costs) are given in parenthesis. Employ the Excel file to answer the following questions Part 1: Net Present Value Use the Excel NPV function...
A company has a 12% WACC and is considering two mutually exclusive investments (that cannot be...
A company has a 12% WACC and is considering two mutually exclusive investments (that cannot be repeated) with the following cash flows: 0 1 2 3 4 5 6 7 Project A -$300 -$387 -$193 -$100 $600 $600 $850 -$180 Project B -$400 $133 $133 $133 $133 $133 $133 $0 What is each project's NPV? Round your answer to the nearest cent. Do not round your intermediate calculations. What is each project's IRR? Round your answer to two decimal places....
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT