Question
Based on the valuations below, which Project (A, B, or C) would you choose for your company and WHY? WACC 12.04% Project A: Project As
Based on the valuations below, which Project (A, B, or C) would you choose for your company and WHY? WACC 12.04%
Project A:
Project As NPV data equals the Net Operating Cash Flows of -$4,919,284, the Internal Rate of Return (IRR) demonstrates that the risk of the project is 5.36%, the Payback Period is 5.24 determined by the need to take the year added to the cumulative cash flows divided by the Net Operating Cas Flows, and the Profitability Index is 0.81. On the other hand, with a 10% Reduction in Price, the NPV data equals the Net Operating Cash Flows of $0.00, the Internal Rate of Return (IRR) demonstrates that the risk of the project is 0%, the Payback Period is 6 determined by the need to take the year added to the cumulative cash flows divided by the Net Operating Cas Flows, and the Profitability Index is 1. Moreover, with a 10% Reduction in Sales Volume, the NPV data equals the Net Operating Cash Flows of $2,550,000, the Internal Rate of Return (IRR) demonstrates that the risk of the project is 2.72%, the Payback Period is 5.6 determined by the need to take the year added to the cumulative cash flows divided by the Net Operating Cas Flows, and the Profitability Index is 1.1.
Project B:
Project Bs NPV data equals the Net Operating Cash Flows of $20,814,000, the Internal Rate of Return (IRR) demonstrates that the risk of the project is 17.78%, the Payback Period is 4.27 determined by the need to take the year added to the cumulative cash flows divided by the Net Operating Cas Flows, and the Profitability Index is 1.77. On the other hand, with a 10% Reduction in Price, the NPV data equals the Net Operating Cash Flows of -$26,755,517, the Internal Rate of Return (IRR) demonstrates that the risk of the project is 20.51%, the Payback Period is 4.08 determined by the need to take the year added to the cumulative cash flows divided by the Net Operating Cas Flows, and the Profitability Index is 0.14. Moreover, with a 10% Reduction in Sales Volume, the NPV data equals the Net Operating Cash Flows of $17,212,500, the Internal Rate of Return (IRR) demonstrates that the risk of the project is 14.87%, the Payback Period is 4.51 determined by the need to take the year added to the cumulative cash flows divided by the Net Operating Cas Flows, and the Profitability Index is 1.64.
Project C:
Project Cs NPV data equals the Net Operating Cash Flows of -$26,755,517, the Internal Rate of Return (IRR) demonstrates that the risk of the project is 20.51%, the Payback Period is 4.08 determined by the need to take the year added to the cumulative cash flows divided by the Net Operating Cas Flows, and the Profitability Index is 0.14. On the other hand, with a 10% Reduction in Price, the NPV data equals the Net Operating Cash Flows of -$26,706,488.13, the Internal Rate of Return (IRR) demonstrates that the risk of the project is 6.26%, the Payback Period is 5.32 determined by the need to take the year added to the cumulative cash flows divided by the Net Operating Cas Flows, and the Profitability Index is 0.11. Moreover, with a 10% Reduction in Sales Volume, the NPV data equals the Net Operating Cash Flows of -$26,872,276, the Internal Rate of Return (IRR) demonstrates that the risk of the project is 16.76%, the Payback Period is 4.37 determined by the need to take the year added to the cumulative cash flows divided by the Net Operating Cas Flows, and the Profitability Index is 0.13.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started