Which project should the company accept

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Reference no: EM131903213

1. Garage, Inc., has identified the following two mutually exclusive projects:

Year	Cash Flow (A)		Cash Flow (B)
0	-$	29,400	-$	29,400
1		14,800		4,500
2		12,700		10,000
3		9,400		15,600
4		5,300		17,200

a-1 What is the IRR for each of these projects? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.

IRR
Project A %
Project B %

a-2 Using the IRR decision rule, which project should the company accept?

Project A
Project B

a-3 Is this decision necessarily correct?
Yes
No

b-1 If the required return is 12 percent, what is the NPV for each of these projects? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)

NPV
Project A $
Project B $

b-2 Which project will the company choose if it applies the NPV decision rule?
Project A
Project B

c. At what discount rate would the company be indifferent between these two projects? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Discount rate %

2.The Sloan Corporation is trying to choose between the following two mutually exclusive design projects.

Year	Cash Flow (I)		Cash Flow (II)
0	-$	63,000	-$	18,100
1		32,000		9,750
2		32,000		9,750
3		32,000		9,750

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 the company applies the profitability index decision rule, which project should the firm accept?

Project I
Project Il

b-1 What is the NPV for both projects? (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)

NPV
Project I $
Project II $

b-2 If the company applies the NPV decision rule, which project should it take?

Project I
Project II

3. Consider the following two mutually exclusive projects:

Year	Cash Flow (A)		Cash Flow (B)
0	-$	342,000	-$	50,500
1		53,000		24,800
2		73,000		22,800
3		73,000		20,300
4		448,000		15,400

Whichever project you choose, if any, you require a 14 percent return 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.)

Payback period
Project A years
Project B years

a-2 If you apply the payback criterion, which investment will you choose?
Project A
Project B

b-1 What is the discounted payback period for each project? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)

Discounted payback period
Project A years
Project B years

b-2 If you apply the discounted payback criterion, which investment will you choose?
Project A
Project B

c-1 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 A $
Project B $

c-2 If you apply the NPV criterion, which investment will you choose?
Project A
Project B

d-1 What is the IRR for each project? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

IRR
Project A %
Project B %

d-2 If you apply the IRR criterion, which investment will you choose?
Project A
Project B

e-1 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 A
Project B

e-2 If you apply the profitability index criterion, which investment will you choose?
Project A
Project B
f. Based on your answers in (a) through (e), which project will you finally choose?
(Click to select)Project AProject B

please answer all parts of all questions, thank you much appreciated

Reference no: EM131903213

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