Calculate the net present value and profitability index

Assignment Help Financial Management
Reference no: EM131523262

Project ABC has an initial cost of $1,000 and generates cash inflow of $2,000 at the end of year 1. Project QRS has an initial cost of $10,000 and has annual cash inflows of $4,400, $4,840, and $5,324 in year 1-3. Assuming a 10% discount rate, calculate the net present value and profitability index for both projects. Which project is better in terms of NPV? Which project is better in terms of PI?

Reference no: EM131523262

Reviews

Write a Review

 

Financial Management Questions & Answers

  About the share price

Bill’s Bakery has current earnings per share of $2.5. Current book value is $4.3 per share. The appropriate discount rate for Bill’s Bakery is 17 percent. Calculate the share price for Bill’s Bakery if earnings grow at 3.4 percent forever.

  Maximization of profit a goal of enterprise management

Why is it more important to get the maximization of value ("value maximization") that the maximization of profit ("profit maximization") as a goal of enterprise management?

  What is the equivalent uniform annual cost of the implement

Lucas Construction just purchased a new track hoe attachment costing $12,500. The CFO, Mr. Cameron Lucas, expects the implement will be used for five years when it is estimated to have a salvage value of $4,000. Maintenance costs are estimated to be ..

  Which bank faces less risk

Consider two local banks. Bank A has 75 loans outstanding, each for $ 1.0 million, that it expects will be repaid today. Which bank faces less risk?

  Stock market is efficient and the stock is in equilibrium

Stock X has the following data. Assuming the stock market is efficient and the stock is in equilibrium, which of the following statements is CORRECT? The stock’s expected dividend yield and growth rate are equal. The stock’s expected price 10 years f..

  Complete the contract and pay them a lump sum settlement now

Three years ago, Sam purchased a farm on contract from an older lady for $149,000 at 7% interest over 15 years. The lady died unexpectedly and the heirs would like Sam to pay off the contract now, which has a current remaining balance of $130,000 wit..

  Keep the equilibrium federal funds rate unchanged

Suppose that banks increase their demand for reserves. Show how the Fed can offset this change through open market operations in order to keep the equilibrium federal funds rate unchanged.

  How much are the monthly payments

How much do you need to save each month, earning 5% interest, in order to have a Future Value (FV) of $40,000? Suppose you don't wait and purchase the $40,000 car today. If you financed the entire $40,000, how much are the monthly payments if you pay..

  Determine the annual financing cost

The additional cost of establishing a field warehouse would be $35,000 per year. Determine the annual financing cost to Clearfield under the arrangement if Clearfield borrows.

  Calculate vintages return on equity

The total assets to equity ratio for the firm is 1.5. Calculate Vintage’s return on equity.

  Corrected after-tax operating income for leon technology

Leon Technology is a firm that specializes in advanced telecommunication software and has been in existence for 4 years. For the current year, the firm reported $ 5 million in after-tax operating income and a book value of equity of $ 25 million. Est..

  Using a minimum of seven financial ratio compare

Using a minimum of seven financial ratio compare the 2012, 2013, and 2014 yearend financial results of the following corporation: Walt Disney corporation, Oracle corporation, Ford motor company

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