Next Gen Corporation is considering two investment opportunities. The company can choose either to invest in Project K or Project M. The expected annual free cash flows for each project are as follows:
Year
Cash flows (RM)
Project K
Project M
0
(7,000)
(7,000)
1
1,800
0
2
(2,500)
0
3
1,800
0
4
4,800
0
5
3,800
10 000
If the required rate of return is 8%, calculate:
- calculate the payback period for each project.
- calculate the net present value for each project.
based on the two investment techniques, which project should be accepted?
Next Gen Corporation is considering two investment opportunities. The company can choose either to invest in Project K or Project M. The expected annual free cash flows for each project are as follows:
Year
Cash flows (RM)
Project K
Project M
0
(7,000)
(7,000)
1
1,800
0
2
(2,500)
0
3
1,800
0
4
4,800
0
5
3,800
10 000
If the required rate of return is 8%, calculate:
- calculate the payback period for each project.
- calculate the net present value for each project.
based on the two investment techniques, which project should be accepted?
Related questions
| Yr | Sates of Affairs Cash Flow | Mcarthys Cash Flow | Gotham Cash Flow | |
| 0 | -$7,500,000 | -$5,000,000 | -$4,000,000 | |
| 1 | $5,000,000 | $1,000,000 | $5,750,000 | |
| 2 | $4,500,000 | $2,000,000 | $5,750,000 | |
| 3 | $3,000,000 | $3,000,000 | -$1,000,000 | |
| 4 | -$1,000,000 | $4,000,000 | $0.00 | |
| 5 | $2,500,000 | $4,000,000 | ||
| 6 | $2,500,000 | |||
Required rate of return: 8.00%
Calculate the payback period for each project. If our required payback period is 3 years which projects will we accept?
Calculate the Net Present Value of each project. Which projects should we accept?
Calculate the Internal rate of return for each project. Which projects should be accepted?
Calculate the Modified Internal Rate of Return for each project. Which projects should be accepted?
Calculated the Profitability Index for each project. Which projects should be accepted?
If the company only has$10,000,000 for projects which project(s) should be accepted using the equivalent Annual Annuity? Report the EEA for each project?
(TCO 6) Davis Company is considering two capital investment proposals. Estimates regarding each project are provided below.
| Project A | Project B | |
| Initial Investment | $800,000 | $650,000 |
| Annual Net Income | $50,000 | 45,000 |
| Annual Cash Inflow | $220,000 | $200,000 |
| Salvage Value | $0 | $0 |
| Estimated Useful Life | 5 years | 4 years |
The company requires a 10% rate of return on all new investments.
Part (a): Calculate the payback period for each project.
Part (b): Calculate the net present value for each project.
Part (c): Which project should Jackson Company accept and why? (Points : 30)
X-treme Vitamin Company is considering two investments, both of which cost $20,000. The firm's cost of capital is 15 percent. The cash flows are as follows:
| |
|
|
| |
What is the payback period for each project? Which project would you accept based on the payback period? . (2 marks)
What is the discounted payback for each project? Which project would you accept based on the discounted payback criterion? (3 marks)
Calculate the NPV of each project? Which project would you choose based on the NPV criterion? (5 marks)
Based on the IRR criteria which project would you choose if they were mutually exclusive
(5 marks)
