Question

Robben Manufacturing has the following two possible projects. The required return is 13 percent. Year Project Y Project Z 0 –$ 28,600 –$ 51,000 1 14,600 14,000 2 13,000 37,000 3 15,400 12,000 4 11,000 35,000 a. What is the profitability index for each project? (Do not round intermediate calculations and round your answers to 3 decimal places, e.g., 32.161.) Profitability index Project Y Project Z b. What is the NPV for each project? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) NPV Project Y $ Project Z $ c. Which, if either, of the projects should the company accept?

Answer #1

a. profitability index= Present value of Cash Inflows /Present value of Cash Outflows

Project Y :

= $ 40,520.74 / $ 28,600

= **1.417**

Project Z :

= $ 71,148.57 /$ 51,000

=**1.395**

b. NPV = Present value of Cash Inflows - Present value of Cash Outflows

Project Y :

= $ 14,600 * 1/(1.13) ^ 1+ $ 13,000 * 1/(1.13) ^ 2+ $ 15,400 * 1/(1.13) ^3 + $ 11,000 * 1/(1.13) ^4 - $ 28,600

= $ 40,520.74 - $ 28,600

= **$ 11,920.74**

Project Z :

= $ 14,000 * 1/(1.13) ^ 1+ $ 37,000 * 1/(1.13) ^ 2+ $ 12,000 * 1/(1.13) ^3 + $ 35,000 * 1/(1.13) ^4 - $ 51,000

= $ 71,148.57 - $ 51,000

= **$ 20,148.57**

c. The correct answer is **Project
Z** must be accepted as it has a higher NPV

The Bosa Corporation is trying to choose between the following
two mutually exclusive design
projects:
Year Cash Flow (I) Cash Flow (II)
0 –$66,000 –$ 17,800
1 29,000 9,600
2 29,000 9,600
3 29,000 9,600
a-1 If the required return for both projects is 10 percent, what
is the profitability index for both projects? (Do not round
intermediate calculations and round your answers to 3 decimal
places, e.g., 32.161.)
Profitability Index
Project I
Project II
b-1 What is the NPV...

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...

The Sloan Corporation is trying to choose between the following
two mutually exclusive design projects:
Year
Cash Flow
(I)
Cash Flow
(II)
0
–$
71,000
–$
17,300
1
33,000
9,350
2
33,000
9,350
3
33,000
9,350
a-1
If the required return is 12 percent, what is the profitability
index for both projects? (Do not round intermediate
calculations. Round your answers to 3 decimal places, e.g.,
32.161.)
Profitability
Index
Project I
Project II
a-2
If...

The Sloan Corporation is trying to choose between the following
two mutually exclusive design projects:
Year
Cash Flow
(I)
Cash Flow
(II)
0
–$
54,000
–$
19,000
1
25,000
10,200
2
25,000
10,200
3
25,000
10,200
a-1
If the required return is 11 percent, what is the profitability
index for both projects? (Do not round intermediate
calculations. Round your answers to 3 decimal places, e.g.,
32.161.)
Profitability
Index
Project I
Project II
a-2
If...

Cori's Sausage Corporation is trying to choose between the
following two mutually exclusive design projects:
Year
Cash Flow (I)
Cash Flow (II)
0
–
$
62,000
–
$
18,200
1
33,000
9,800
2
33,000
9,800
3
33,000
9,800
a-1. If the required return is 12 percent, what
is the profitability index for each project? (Do not round
intermediate calculations and round your answers to 3 decimal
places, e.g., 32.161.)
Profitability Index
Project I
Project II
a-2. If the...

Novell, Inc., has the
following mutually exclusive projects.
Year
Project A
Project B
0
–$28,000
–$31,000
1
16,000
17,000
2
12,500
11,000
3
3,700
12,500
a-1.
Calculate the payback
period for each project. (Do not round intermediate
calculations and round your answers to 3 decimal places, e.g.,
32.161.)
a-2.
If the company's
payback period is two years, which, if either, of these projects
should be chosen?
Project A
Project...

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 ...

You are asked to evaluate the following two projects for the
Norton corporation. Use a discount rate of 10 percent. Use Appendix
B for an approximate answer but calculate your final answer using
the formula and financial calculator methods.
Project X (Videotapes
of the Weather Report)
($14,000 Investment
Project Y (Slow-Motion
Replays of Commercials)
($34,000 Investment)
Year
Cash Flow
Year
Cash Flow
1
$7,000
1
$17,000
2
$5,000
2
$10,000
3
$6,000
3
$11,000
4
$5,600
4
$13,000
a. Calculate...

Cori's Sausage Corporation is trying to choose between the
following two mutually exclusive design projects:
Year
Cash Flow (I)
Cash Flow (II)
0
–$
51,000
–$
25,800
1
25,000
13,500
2
25,000
13,500
3
25,000
13,500
a-1.
If the required return is 12 percent, what is the profitability
index for each project?(Do not round intermediate
calculations and round your answers to 3 decimal places, e.g.,
32.161.)

Tri Star, Inc., has the following mutually exclusive
projects:
Year
Project A
Project B
0
–$
13,400
–$
8,800
1
8,000
3,500
2
6,600
3,000
3
2,100
5,400
Calculate 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
Based on the payback period, which project should the company
accept?
Project A
Project B
If the appropriate discount rate is 13...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 3 minutes ago

asked 4 minutes ago

asked 9 minutes ago

asked 9 minutes ago

asked 10 minutes ago

asked 11 minutes ago

asked 18 minutes ago

asked 29 minutes ago

asked 30 minutes ago

asked 33 minutes ago

asked 33 minutes ago

asked 44 minutes ago