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Help me do this 2010 Inc, imposes a payback cutoff of three years for its projects. If the company has the following two projects available,
Help me do this
- 2010 Inc, imposes a payback cutoff of three years for its projects. If the company has the following two projects available, should it accept either of them? Assume cash flows occur evenly throughout the years.
Year | Cash Flow (A) | Cash Flow (B) |
0 | -$25,000 | -$52,000 |
1 | 20,000 | 14,000 |
2 | 26,000 | 17,000 |
3 | 18,000 | 11,000 |
4 | 6,000 | 240,000 |
- Based on the below cash flows, Hello Ltd. uses the NPV decision rule. At a required return of 12 percent, should the firm accept this project? What if the required return is 30 percent?
Year | Cash Flow |
0 | -$32,000 |
1 | 16,000 |
2 | 20,000 |
3 | 17,000 |
- BOBO Company has identified the following two mutually exclusive projects:
Year | Cash Flow (A) | Cash Flow (B) |
0 | -$43,500 | -$43,500 |
1 | 21,410 | 6,400 |
2 | 18,450 | 14,300 |
3 | 13,800 | 22,900 |
4 | 6,900 | 25,000 |
- What is the IRR for each of these projects (Excel or financial calculator is required)? Using the IRR decision rule, which project should the company accept?
- If the required return is 14 percent, what is the NPV for each of these projects? Which project will the company choose if it applies the NPV decision rule?
- What is the profitability index for the following set of cash flows if the relevant discount rate is 8 percent? What if the discount rate is 25 percent?
Year | Cash Flow |
0 | -$15,100 |
1 | 7,600 |
2 | 6,800 |
3 | 6,900 |
- Online company expects to pay the following dividends over the next four years: $11, $8, $5 and $2. Afterward, the company pledges to maintain a constant 5 percent growth rates in dividends forever. If the required return on the stock is 16 percent, what should the current share price be?
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