A company is considering two mutually exclusive investments with a discount rate of 10%. The cash flows of the projects over time follows: Time Project A Project B 0 - RM300,000 - RM405,000 1 - RM387,000 RM134,000 2 - RM193,000 RM134,000 3 - RM100,000 RM134,000 4 RM600,000 RM134,000 5 RM600,000 RM134,000 6 RM850,000 RM134,000 7 - RM180,000 RM0 Question: The company does not want to issue new share capital or debentures to finance this project. Recommend three (3) appropriate financing methods for this project. Provide support for your recommendations.

A company is considering two mutually exclusive investments with a discount rate of 10%. The cash flows of the projects over time follows: Time Project A Project B 0 - RM300,000 - RM405,000 1 - RM387,000 RM134,000 2 - RM193,000 RM134,000 3 - RM100,000 RM134,000 4 RM600,000 RM134,000 5 RM600,000 RM134,000 6 RM850,000 RM134,000 7 - RM180,000 RM0 Question: The company does not want to issue new share capital or debentures to finance this project. Recommend three (3) appropriate financing methods for this project. Provide support for your recommendations.

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 4EB: Assume a company is going to make an investment in a machine of $825,000 and the following are the...

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A company is considering two mutually exclusive investments with a discount rate of 10%.The cash flows of the projects over time follows: Time Project A Project B 0 - RM300,000 - RM405,000 1 - RM387,000 RM134,000 2 - RM193,000 RM134,000 3 - RM100,000 RM134,000 4 RM600,000 RM134,000 5 RM600,000 RM134,000 6 RM850,000 RM134,000 7 - RM180,000 RM0 Net Present Value: Cash flows Discount rate at 10% PV of cash flows Time Project A Project B Project A Project B 0 -300,000 -405,000 1.0000 (300,000.00) (405,000.00) 1 -387,000 134,000 0.9091 (351,818.18) 121,818.18 2 -193,000 134,000 0.8264 (159,504.13) 110,743.80 3 -100,000 134,000 0.7513 (75,131.48) 100,676.18 4 600,000 134,000 0.6830 409,808.07 91,523.80 5 600,000 134,000 0.6209 372,552.79 83,203.46 6 850,000 134,000 0.5645 479,802.84 75,639.51…
A company is considering two mutually exclusive investments with a discount rate of 10%.The cash flows of the projects over time follows: Time Project A Project B 0 - RM300,000 - RM405,000 1 - RM387,000 RM134,000 2 - RM193,000 RM134,000 3 - RM100,000 RM134,000 4 RM600,000 RM134,000 5 RM600,000 RM134,000 6 RM850,000 RM134,000 7 - RM180,000 RM0 Net Present value given : Time Project A Project B Project A Project B 0 -300,000 -405,000 1.0000 (300,000.00) (405,000.00) 1 -387,000 134,000 0.9091 (351,818.18) 121,818.18 2 -193,000 134,000 0.8264 (159,504.13) 110,743.80 3 -100,000 134,000 0.7513 (75,131.48) 100,676.18 4 600,000 134,000 0.6830 409,808.07 91,523.80 5 600,000 134,000 0.6209 372,552.79 83,203.46 6 850,000 134,000 0.5645 479,802.84 75,639.51 7 -180,000 0 0.5132…
A company is considering two mutually exclusive investments with a discount rate of 10%.The cash flows of the projects over time follows: Time Project A Project B 0 - RM300,000 - RM405,000 1 - RM387,000 RM134,000 2 - RM193,000 RM134,000 3 - RM100,000 RM134,000 4 RM600,000 RM134,000 5 RM600,000 RM134,000 6 RM850,000 RM134,000 7 - RM180,000 RM0 A. What is the Net Present Value (NPV) for each project? B. Since the projects are mutually exclusive, which project would you recommend?Justify your recommendation. C. Suppose that the projects are independent projects, which project (s) would yourecommend? Justify your recommendation.
McCann Co. has identified an investment project with the following cash flows. Year Cash Flow 1 $800 2 1,030 3 1,340 4 1,110 a If the discount rate is 10 percent, what is the present value of these cash flows? b What is the present value at 18 and 28 percent?
Mendez Company has identified an investment project with the following cash flows. Year Cash Flow 1 $ 810 2 1,110 3 1,370 4 1,500 a. If the discount rate is 11 percent, what is the present value of these cash flows? b. If the discount rate is 17 percent, what is the present value of these cash flows? c. If the discount rate is 25 percent, what is the present value of these cash flows?
Specter Co. has identified an investment project with the following cash flows. What is the present value of these cash flows if the discount rate is 18%? Year Cash Flow $795 S945 $1,325 | S1,860 1 2 3 4 $2450.28 $3118.22 $2250.18 $3314.59
Cocoa Company is evaluating an investment shown below. The investment will acquire an initial investment of RM 50,000. The cost of capital is 11 percent and the cash inflows are as follows:- Year Main Complex1 RM 15,0002 RM 10,0003 RM 12,5004 RM 15,0005 RM 30,000Based on the above information, calculate for Cocoa Company:i. Payback period ii. Net Present Value (NPV) iii. Profitability index b. After calculating the first investment, Cocoa Company found another investment.Project B costs RM1,120,000 and having payback period of 3.50 years, discountedpayback period of 4.44 years, Net Present Value (NPV) of RM 460,000 and ProfitabilityIndex of 1.41. Which project would you recommend considering all?
1.A company is considering a R250 000 investment with the following cash flows Year 1 : R30 000 Year 2: R60 000 Year 3: R120 000 Year 4: R130 000 Year 5: R160 000 a) Determine the payback period of the investment ( present in table format) b) If the company wants to recover its initial investment in year 3, is the investment worthwhile? c) Identify and explain any 3 advantages of using payback method.
Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 - $ 215,000 -$ 57,000 34,000 32,900 L234 1 4 45,000 51,000 270,000 24,300 18,300 17,800 The required return on these investments is 13 percent. a. What is the payback period for each project? Note: Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. b. What is the NPV for each project? Note: Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. c. What is the IRR for each project? Note: Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16. d. What is the profitability index for each project? Note: Do not round intermediate calculations and round your answers to 3 decimal places, e.g., 32.161. e. Based on your answers in (a) through (d), which project will you finally choose? a. Project A Project B b. Project A Project B c. Project A Project B d.…
The cash flows associated with an investment project are as follows: Project Y (200 000) 100 000 Year 100 000 120 000 110 000 The discount rate is 8 percent. What's the discount payback period of the projects? (compile a spreadsheet) Calculate NPV, PI of a projects Calculate IRR of a projects Should the firm accept the project? a) b) c) d) 01234
Two mutually exclusive investment projects have the following forecasted cash flows: Year A B 0 -$20,000 -$20,000 1 +11,000 0 2 +11,000 0 3 +11,000 0 4 +11,000 +55,000 Use Table II and Table IV to answer the questions. Compute the internal rate of return for each project. Round your answers to one decimal place.IRRA: % IRRB: % Compute the net present value for each project if the firm has a 10 percent cost of capital. Round your answers to the nearest dollar.NPVA: $ NPVB: $ Which project should be adopted? Why? should be chosen because it has the higher . It is assumed that the firm's reinvestment opportunities are more accurately represented by the .
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Time	Project A	Project B
0	- RM300,000	- RM405,000
1	- RM387,000	RM134,000
2	- RM193,000	RM134,000
3	- RM100,000	RM134,000
4	RM600,000	RM134,000
5	RM600,000	RM134,000
6	RM850,000	RM134,000
7	- RM180,000	RM0