Find the discounted payback period for each project

Assignment Help Finance Basics
Reference no: EM13292960

Suppose a company is considering two investment projects. Both projects require an upfront expenditure of $30 million. The company estimates that the cost of capital is 10% and that the investments will result in the following after-tax cash flows (in millions of dollars). Complete parts (a) through (e) below.

Year Project A Project B
1 $28 $10
2 $20 $15
3 $10 $20
4 $5 $25

a) Find the regular payback period for each project.
b) Find the discounted payback period for each project.
c) Assume that the two projects are independent and the cost of capital is 10%. Which project or projects should the company undertake? Base your results on the NPV.
d) Assume that the two projects are mutually exclusive and the cost of capital is 5%. Which project or projects should the company undertake? Base your results on the MIRR.
e) Explain why quantitative measures may not always be the best way to evaluate a project.

 

Reference no: EM13292960

Questions Cloud

What would be the incremental bad debt losses : The variable cost percentage is 60 percent and the cost of capital is 15 percent. What would be the incremental bad debt losses if the change were made?
What is the approximate effective cost of missing the cash : What is the approximate effective cost of missing the cash discounts from each supplier? If you could not take advantage of either cash discount offer, which supplier would you select?
Explain solutions using the density of decane : If I have 2 mM of pyrene in decane, how do I make 10 uM, 0.5 mM, 1.0 mM, and 1.5 mM solutions using the density of decane (0.73 g/mL)
What rate of return should investors expect on this fund : Assume that you are the portfolio manager of the SF Fund, a $3 million hedge fund that contains the following stocks. The required rate of return on the market is 11.00% and the risk-free rate is 5.00%. What rate of return should investors expect ..
Find the discounted payback period for each project : Assume that the two projects are mutually exclusive and the cost of capital is 5%. Which project or projects should the company undertake? Base your results on the MIRR.
How to determine the percent yield of a reaction : 1FeO3+2 Al= 1Al2O3+2Fe, Determine the percent yield of a reaction that produces 28.65g of Fe when 50.0g of Fe2O3 reacts with excess Al according to the following reaction. Be sure to balance the reaction.
What is the magnitude of the dipole moment : What is the magnitude of the dipole moment and find an expression for the electric field Eat the center of the semicircle. Give your answer in component form.
With what speed does the skier leave the track : A 70-kg ski jumper starts from rest 59 m above the ground on an icy track and flies off the track at an angle of 31°, With what speed does the skier leave the track
Explain what is the molar mass pka1 : The pH is 3.95 at the first equialence point and 9.27 at the second equivalence point. If the acid solution contained 0.2015 g of the acid, what is the molar mass, pKa1, and pKa2 of the acid

Reviews

Write a Review

Finance Basics Questions & Answers

  What is the future value of investing

You are going to loan your friend $1,000 for one year at a 5% rate of interest. How much additional interest can you earn if you compound the rate continuously rather than annually?

  What is the receivables turnover

Essence of Skunk Fragrances, Ltd., sells 8,700 units of its perfume collection each year at a price per unit of $730. All sales are on credit with terms of 2/15, net 60. The discount is taken by 80 percent of the customers.

  Calculate the following ratios

What financial statements would you use to calculate the following ratios: Return on Equity, Profit Margin, Debt to Equity, and Receivables Turnover?

  What is the average accounts payable balance

Johnny's Pizza shop has sales of $531,000 and costs of $358,000. The profit margin is 4.8 % and teh accounts payable period is 41 days. What is the average accounts payable balance?

  Determine work in process inventory

Emmy Corporation had starting raw materials inventory of $7,000. During the period, the company purchased $47,000 of raw materials on account.

  Acquisition management

Describe the roles of the Executive Branch, Congress, and defense industry in Defense Acquisition. What are some of the responsibilities and objectives of each sector?

  How the imputation tax system works in australia

Briefly explain how the imputation tax system works in Australia by providing an example. Assume a 30% corporate tax rate and a 15% marginal tax rate for the investor.

  Identify ethical actions

The net income of Simon and Hobbs, a department store, reduced sharply during 2000. Carol Simon, owner of the store, anticipates the required for a bank loan in 2001.

  Computing the average real return for treasury bills

Computing the average real return for treasury bills and Calculate the average real return for Treasury bills over this period

  Should ccc take the discount

The supplier is now offering a quantity discount of $0.03 per gallon if CCC orders 10,000 gallons at a time. Should CCC take the discount? WHY?

  Explain accounts receivables

Explain Accounts receivables and No other asset build-up will be required to service the new accounts

  What was your total dollar return on this investment

If the inflation rate last year was 3 percent, what was your total real rate of return on this investment? (Do not round intermediate calculations.)

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd