Modified internal rate of return and profitability index

Assignment Help Financial Management

Reference no: EM131067615

You are a financial analyst for the Brittle Company. The director of capital budgeting has asked you to analyze two proposed capital investments: Projects X and Y. Each project has a cost of $10,000, and the cost of capital for each is 12%. The projects’ expected net cash flows are shown in the table below.

Expected Net Cash Flows

Year Project X Project Y

0 – $10,000 $10,000

1- 6,500 3,500

2- 3,000 3,500

3- 3,000 3,500

4- 1,000 3,500

a. Use the Homework Student Workbook to calculate each project’s net present value (NPV), internal rate of return (IRR), modified internal rate of return (MIRR), and profitability index (PI).

b. Which project or projects should be accepted if they are independent?

c. Which project or projects should be accepted if they are mutually exclusive?

Reference no: EM131067615

Questions Cloud

They pay interest annually and coupon rate : Heath Foods's bonds have 15 years remaining to maturity. The bonds have a face value of $1,000 and a yield to maturity of 9%. They pay interest annually and have a 7% coupon rate. What is their current yield?

Percentage working in agriculture : In the developed countries, more people are employed in the service sector than manufacturing, with a tiny percentage working in agriculture. Globally, which sector now employs the fewest people?

Define what is ethics in the field of engineering : From the expression, "Build a better mousetrap and the world will beat a path to your door," write a goal/problem statement and a set of at least six specifications that you would apply to a solution. Suggest at least three concepts, complete with..

Marketing departments predict sales trends : There is a good living to be made out there by using regression and time series analyses to help marketing departments predict sales trends. Statistical tools like this are the only aspect of creating a sales forecast. If you leave it up to the compu..

Modified internal rate of return and profitability index : You are a financial analyst for the Brittle Company. The director of capital budgeting has asked you to analyze two proposed capital investments: Projects X and Y. Each project has a cost of $10,000, and the cost of capital for each is 12%. Use the H..

What is the tax effect of selling the old machine : Your company is considering the replacement of an old delivery van with a new one that is more efficient. The old van cost $40,000 when it was purchased 5 years ago. The old van is being depreciated using the simplified straight-line method over a us..

Describe the organizations important business processes : Describe the organizations important business processes - Describe the organizations structure and suggest strategic information systems appropriate for that particular business. including those based on Internet technology.

Violent portrayal of men in american media : Watch this clip about the violent portrayal of men in American media. Do you think that the aggressive and violent ways in which men are portrayed in the media make it more socially acceptable for men to be violent with family members? Does it enc..

User Account

All Pages