Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

A company considers the following investment project A (all amount are in millions of euros; all cash flows at the end of each year). The

image text in transcribed
image text in transcribed
image text in transcribed
A company considers the following investment project A (all amount are in millions of euros; all cash flows at the end of each year). The initial investment. lo. is a cash outflow: all NOCFs are cash inflows. 0 1 2 3 To 370.0 NOCF 175.0 140.0 83.0 9.0 The risk profile of project A dictates a WACC of 3.0% for this investment project. As it appears, project A has an IRR of 5.7%, and a payback period of 2.66 years, As an alternative investment, the following information is given for project B, which requires an upfront initial investment.lo of 600.0 mln, which is a cash outflow, and this project also generates positive cash inflows. P.I NPV WACC Payback period IRR EACF 0.62 -230.0 mln 5.5% 3.38 years 12.0% -66.0 mln/y Projects A and B have the same expected lifespan. 1.0p a What is the NPV of project A? Provide your final answer rounded to the nearest whole number (in millions). Would your NPV be negative, then use a minus sign. For example, you calculate an NPV of - 123.45678 million, and thus you now answer: -123 Answer 1.0p b What is the Profitability Index (PI) of project A? Provide your final answer rounded to two decimal places, and use a decimal point (no comma). For example: You calculate a Pl of 1.23456, and give in: 1.23 Answer 1.0pc What is the EACF of project A? Provide your final answer rounded to the nearest whole number (in millions). For example, you calculate an EACF of 23.456 million, and you now give in: 23 Answer 1.Op d Which project should you now prefer, based upon the below criteria? Project Project B Indifferent (equally good) O NPV O Profitability index O EACF IRR O O Payback period O O

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Consolidation In The European Financial Industry

Authors: R. Bottiglia, E. Gualandri , G. Mazzocco

1st Edition

0230233228,0230275028

More Books

Students also viewed these Finance questions

Question

1. Define genetic algorithm.

Answered: 1 week ago