What is the profitability index for each project

Assignment Help Financial Management

Reference no: EM131063274

Consider the following two mutually exclusive projects:

Year Cash Flow (A) Cash Flow (B)

0 $433,000 $44,000

1 40,000 21,200

2 66,000 12,500

3 83,000 22,600

4 548,000 19,400

The required return on these investments is 14 percent. Required:

(a) What is the payback period for each project? (Do not round intermediate calculations. Round your answers to 2 decimal places (e.g., 32.16).) Payback period Project A years Project B years

(b) What is the NPV for each project? (Do not round intermediate calculations. Round your answers to 2 decimal places (e.g., 32.16).) Net present value Project A $ Project B $

(c) What is the IRR for each project? (Do not round intermediate calculations. Enter your answers as a percentage rounded to 2 decimal places (e.g., 32.16).) Internal rate of return Project A % Project B %

(d) What is the profitability index for each project? (Do not round intermediate calculations. Round your answers to 3 decimal places (e.g., 32.161).) Profitability index Project A Project B

(e) Based on your answers in (a) through (d), which project will you finally choose?

Reference no: EM131063274

Reviews

Write a Review

Message

Financial Management Questions & Answers

Sustainable growth rate of earnings and dividends

Trust Bankers just paid an annual dividend of $1.9 per share. The expected dividend growth rate is 6.7 percent, the discount rate is 12 percent, and the dividends will last for 8 more years. What is the value of the stock? If the return on equity for..

Calculate the present value of this investment

1. Cash flows from a new factory are expected to be $3,000,000 per year, every year for the next ten (10) years. If investor's use 6.25% as the discount rate, calculate the present value of this investment.

Now focus on the management variances

Now focus on the management variances. Note that the case does not contain data related to supplies costs or fixed costs, so the management variances are, in reality, staffing variances. Break down the staffing variances into rate and efficiency vari..

Develop a cash budget for his latest venture

To avoid any uncertainty regarding his business' financing needs at the time when such needs may arise, Cyrus Brown wants to develop a cash budget for his latest venture: Cyrus Brown Manufacturing (CBM)

Evaluate the costing process and procedures

Evaluate the costing process and procedures of the organisation with respect to method or approach utilised - capital decision making process within the organisation with regards to what methods are utilised, how such methods are chosen, how project..

How the fed should respond to prevailing conditionsconsider

how the fed should respond to prevailing conditions.consider the existing economic conditions including inflation and

What was the capital gains yield

Suppose a stock had an initial price of $80 per share, paid a dividend of $1.35 per share during the year, and had an ending share price of $87. What was the capital gains yield?

What is expected capital gains yield for coming year

One year ago Clark Company issued a 10-year, 13% semiannual coupon bond at its par value of $1,000. Currently, the bond can be called in 6 years at a price of $1,065, and it now sells for $1,270. What is the expected capital gains (or loss) yield for..

What return are shareholders expecting

A company recently paid a $1.05 dividend. The dividend is expected to grow at a 16.1 percent rate. At a current stock price of $71.75, what return are shareholders expecting?

Income statement and balance sheet in regards to timing

What is the difference between the income statement and balance sheet in regards to timing? What is wrong with this statement: "The clinic's cash balance for 2011 was $150,000, while its net income on December 31, 2011 was $50,000."

What was the company net working capital

The Whole Foods Market, Inc. balance sheet for the fiscal year ending September 29, 2013 included the following: total current assets of $1,540 million, total assets of $4,320 million, total current liabilities of $849 million, and total liabilities ..

Calculating EAR

Friendly’s Quick Loan Inc., offers you “five for four, or I knock on your door.” This means you get $4 today and repay $5 when you get your paycheck in one week (or else), What’s the effective annual return Friendly’s earns on this lending business? ..

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!

Submit Assignment

User Account

All Pages