Question

Consider the following projects: Project C0 C1 C2 A − $ 2,850 + $ 2,750 +...

Consider the following projects:

Project C0 C1 C2
A − $ 2,850 + $ 2,750 + $ 1,950
B − 2,850 + 2,190 + 1,878

a. Calculate the profitability index for A and B assuming a 22% opportunity cost of capital.

Project A:

Project B:

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Project A:

Present value = Future value / (1 + rate)^time

Present value of cash flows = 2750 / (1 + 0.22)^1 + 1950 / (1 + 0.22)^2

Present value of cash flows = 2,254.098361 + 1,310.131685

Present value of cash flows = 3,564.230046

profitability index = Present value of cash flows / initial investment

profitability index = 3,564.230046 / 2850

profitability index = 1.25

Project B:

Present value = Future value / (1 + rate)^time

Present value of cash flows = 2,190 / (1 + 0.22)^1 + 1,878 / (1 + 0.22)^2

Present value of cash flows = 1,795.081967 + 1,261.757592

Present value of cash flows = 3,056.839559

profitability index = Present value of cash flows / initial investment

profitability index = 3,056.839559 / 2850

profitability index = 1.07

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
Project C0 C1 C2 A -2300 2200 1400 B -2300 1640 1768 Calculate the profitability index...
Project C0 C1 C2 A -2300 2200 1400 B -2300 1640 1768 Calculate the profitability index for A and B assuming a 25% opportunity cost of capital. (Do not round intermediate calculations. Round your answers to 4 decimal places.)
Consider the following projects: Cash Flows ($) Project C0 C1 D –10,900 21,800 E –20,900 36,575...
Consider the following projects: Cash Flows ($) Project C0 C1 D –10,900 21,800 E –20,900 36,575 Assume that the projects are mutually exclusive and that the opportunity cost of capital is 8%. a. Calculate the profitability index for each project. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Project Profitability Index D E b-1. Calculate the profitability-index using the incremental cash flows. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Profitability-index b-2....
Consider the following projects: Cash Flows ($) Project C0 C1 D –11,300 22,600 E –21,300 37,275...
Consider the following projects: Cash Flows ($) Project C0 C1 D –11,300 22,600 E –21,300 37,275 Assume that the projects are mutually exclusive and that the opportunity cost of capital is 9%. a. Calculate the profitability index for each project. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Project Profitability Index D E b-1. Calculate the profitability-index using the incremental cash flows. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Profitability-index b-2....
Suppose the cash flows for project are C0 = -2000; C1 = 500; C2 = 1000;...
Suppose the cash flows for project are C0 = -2000; C1 = 500; C2 = 1000; C3 = 4000, C4= 1000, C5= 500. The discounted payback period is ____________________ and profitability index is ___________________ at a discount rate of 10 percent.
Here are the the cash flows for two mutually exclusive projects: Project C0 C1 C2 C3...
Here are the the cash flows for two mutually exclusive projects: Project C0 C1 C2 C3 A -21,200 9,328 9,328 9,328 B -21,200 0 0 28,620 what is the IRR of each project? (round answer to 2 decimal places)
Here are the cash flows for two mutually exclusive projects: Project C0 C1 C2 C3 A...
Here are the cash flows for two mutually exclusive projects: Project C0 C1 C2 C3 A −$ 22,200 +$ 9,768 +$ 9,768 +$ 9,768 B − 22,200 0 0 + 29,970 What is the IRR of each project? (Round your answers to 2 decimal places.)
Consider projects A and B: Cash Flows (dollars) Projects A B C0 450,000 320,000 C1 310,000...
Consider projects A and B: Cash Flows (dollars) Projects A B C0 450,000 320,000 C1 310,000 80,000 C2 120,000 100,000 C3 85,000 250,000 What is the NPV at 10% required rate? Which is the best Project?
Consider projects A and B: Cash Flows (dollars) Projects A B C0 450,000 320,000 C1 310,000...
Consider projects A and B: Cash Flows (dollars) Projects A B C0 450,000 320,000 C1 310,000 80,000 C2 120,000 100,000 C3 85,000 250,000 What is the NPV at 10% required rate? Which is the best Project?
Consider the following cash flows: Cash Flows ($) C0 C1 C2 −6,950 4,700 18,400 a. Calculate...
Consider the following cash flows: Cash Flows ($) C0 C1 C2 −6,950 4,700 18,400 a. Calculate the net present value of the above project for discount rates of 0, 50, and 100%. NPV @ 0% $ NPV @ 50% $ NPV @100% $ b. What is the IRR of the project? (Do not round intermediate calculations. Enter your answer as a percent rounded to the nearest whole number.) IRR %
Given the following Cash flows: C0 = - $6,750 C1 = $4,500 C2 = $18,000 Calculate...
Given the following Cash flows: C0 = - $6,750 C1 = $4,500 C2 = $18,000 Calculate the NPV of the above project for discount rates of 0%, 50%, and 100%. What is the IRR of the project?
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT