Question

Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 –$218,917...

Consider the following two mutually exclusive projects:

Year Cash Flow (A) Cash Flow (B)
0 –$218,917        –$16,419         
1 25,700        5,985         
2 53,000        8,370         
3 58,000        13,931         
4 420,000        8,655   


Whichever project you choose, if any, you require a 6 percent return on your investment.

What is the NPV for Project A?

What is the NPV for Project B?

Homework Answers

Answer #1

A:

Present value of inflows=cash inflow*Present value of discounting factor(rate%,time period)

=25700/1.06+53000/1.06^2+58000/1.06^3+420,000/1.06^4

=$452,792.35

NPV=Present value of inflows-Present value of outflows

=$452,792.35-$218917

=$233,875.35(Approx).

B:

Present value of inflows=cash inflow*Present value of discounting factor(rate%,time period)

=5985/1.06+8370/1.06^2+13931/1.06^3+8655/1.06^4

=$31647.80

NPV=Present value of inflows-Present value of outflows

=$31647.80-$16419

=$15228.80(Approx).

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 –$218,917...
Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 –$218,917        –$16,419          1 25,700        5,985          2 53,000        8,370          3 58,000        13,931          4 420,000        8,655    Whichever project you choose, if any, you require a 6 percent return on your investment. What is the discounted payback period for Project A? What is the discounted payback period for Project B?
Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 –$244,500...
Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 –$244,500 –$14,607 1 29,800 4,237 2 59,000 8,285 3 55,000 13,203 4 410,000 8,788 Whichever project you choose, if any, you require a 6 percent return on your investment. a. What is the payback period for Project A? What is the payback period for Project B?    What is the discounted payback period for Project A?    What is the discounted payback period for Project...
Consider the following two mutually exclusive projects:    Year Cash Flow (A) Cash Flow (B) 0...
Consider the following two mutually exclusive projects:    Year Cash Flow (A) Cash Flow (B) 0 –$285,537        –$14,875          1 28,200        4,193          2 59,000        8,632          3 52,000        13,431          4 396,000        8,922              Whichever project you choose, if any, you require a 6 percent return on your investment. (e) What is the NPV for Project A? (Click to select)$146,378.68$155,433.03$150,905.86$143,360.56$158,451.15    (f) What is the NPV for Project B ? (Click to select)$15,862.45$14,653.88$14,351.74$15,560.31$15,107.1...
Part 2. Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B)...
Part 2. Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0                    - $ 300,000               - $40,000 1 20,000 19,000 2 50,000 12,000 3 50,000 18,000 4 390,000 10,500 Whichever project you choose, if any, you require a 15 percent return on your investment. a. If you apply the payback criterion, which investment will you choose? Why? b. If you apply the discounted payback criterion, which investment will you choose? Why? c. If...
Consider the following two mutually exclusive projects:    Year Cash Flow (A) Cash Flow (B) 0...
Consider the following two mutually exclusive projects:    Year Cash Flow (A) Cash Flow (B) 0 –$ 341,000 –$ 51,000    1 54,000 24,900    2 74,000 22,900    3 74,000 20,400    4 449,000 15,500    Whichever project you choose, if any, you require a return of 15 percent on your investment.    a-1 What is the payback period for each project? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)    a-2...
Consider the following two mutually exclusive projects: Year 0 Cash Flow(X) - $19,200 Cash Flow(Y) -$19,200...
Consider the following two mutually exclusive projects: Year 0 Cash Flow(X) - $19,200 Cash Flow(Y) -$19,200 Year 1 Cash Flow(X) 8,650 Cash Flow(Y) 9,700 Year 2 Cash Flow(X) 8,700 Cash Flow(Y) 7,600 Year 3 Cash Flow (X) 8,600 Cash Flow (Y) 8,500 A.) Calculate the IRR for each project. Project X ___% Project Y ___% B.) What is the crossover rate for these two projects? C.) What is the NPV of Projects X and Y at discount rates of 0...
Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 –$...
Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 –$ 424,000 –$ 39,500 1 44,500 20,300 2 61,500 13,400 3 78,500 18,100 4 539,000 14,900    The required return on these investments is 11 percent. a. What is the payback period for each project? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) Payback period Project A years Project B years b. What is the NPV for each...
Consider the following two mutually exclusive projects: Year Cash Flow (Project I) Cash Flow (Project II)...
Consider the following two mutually exclusive projects: Year Cash Flow (Project I) Cash Flow (Project II) 0 -$12,300 -$44,000 1 $1,800 $14,000 2 $6,000 $30,000 3 $2,000 $5,000 4 $5,000 $10,000 5 $7,000 $5,000 The required return is 10% for both projects. Assume that the internal rate of return (IRR) of Project I and Project II is 18% and 15%, respectively. a) Which project will you choose if you apply the NPV criterion? Why? b) Which project will you choose...
Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 –$40,000...
Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 –$40,000       –$180,000       1 25,000       15,000       2 22,000       45,000       3 20,000       50,000       4 15,000       275,000       The required return on these investments is 11 percent. Required: (a) What is the payback period for each project? (Do not round intermediate calculations. Round your answers to 2 decimal places (e.g., 32.16).) Payback period   Project A years     Project B years  ...
Mahjong, Inc., has identified the following two mutually exclusive projects:    Year Cash Flow (A) Cash...
Mahjong, Inc., has identified the following two mutually exclusive projects:    Year Cash Flow (A) Cash Flow (B) 0 –$37,300        –$37,300        1 19,660        7,180        2 15,170        13,680        3 12,660        20,160        4 9,660        24,160          Required: (a) What is the IRR for Project A? (b) What is the IRR for Project B? (c) If the required return is 11 percent, what is the NPV for Project A? (d) If the required...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT