Hewitt Company is considering two capital investments. Both investments have an initial cost of $10,000,000 and total net cash inflows of $16,000,000 over 10 years. Hewitt requires a 10% rate of return on this type of investment Expected net cash inflows are as follows (Click the icon to view the expected net cash inflows.) Read the requirements Requirement 1. Use Excel to compute the NPV and IRR of the two plans. Which plan, if any, should the company pursue? (Use parentheses or a minus sign for a negative NPV Round the NPV calculations to the nearest whole dollar and the IRR calculations to two decimal places. XX%.) The NPV (net present value) of Plan Alpha is The NPV (net present value) of Plan Beta is The IRR (Internal rate of retum) of Plan Alpha is Data table Requirements 1. Use Excel to compute the NPV and IRR of the two plans. Which plan, if any, should the company pursue? 2. Explain the relationship between NPV and IRR. Based on this relationship and the company's required rate of return, are your answers as expected in Requirement 1 ? Why or why not? 3. After further negotiating, the company can now invest with an initial cost of $9,500,000 for both plans. Recalculate the NPV and IRR. Which plan, if any, should the company pursue? Hewitt Company is considering two capital investments. Both investments have an inittal cost of $10,000,000 and total net Requirement 1. Use Excel to compute the NPV and IRR of the two plans. Which plan, if any, should the company pursue? (Use parentheses or a minus sign for a negative NPV. Round the NPV calculations to the nearest whole dollar and the IRR calculations to two decimal places, % ) The NPV (net present value) of Plan Alpha is The NPV (net present value) of Plan Beta is The IRR (intemal rate of return) of Plan Alpha is The IRR (intemal rate of return) of Plan Beta is Which plan, if any, should the company pursue? Based on the results above, the company should pursue because the NPV is and the IRR is the company's required rate of return Requirement 2. Explain the relationship between NPV and IRR. Based on this relationship and the company's required rate of return, are your answers as expected in Requirement 1? Why or why not? The internal rate of retum is the interest rate that makes the net present yalue of an investment Thus, if an investment's net present value is positve. the intemal rate of return is the required rate of retum and if the net present value is negative, the intemal rate of telum is the required rate of return Based on this relationship and the company's required rate of return, are your answers as expected in Requirement 12 Why or why not? Based on the celationship described above, the internal rate of retum and net present valup calculated in Requirement 1 for the two plans as expected. For Plan Alpha, the net present value is and the internal rate of retum is the required rate of return. For Plan Beta, the net present yalue is and the infermal rate of return is the required rate of return. Requirement 3. After further negotiating, the company can now invest with an initial cost of $9.500,000 for both plans Recalculate the NPV and IRR Which plan, if any, should the company pursue? (Use Excel to determine your answers Use barentheses or a minus sion for a neoative NPV. Round the NPV calculations to the nearest whole dollar and the IRR Hewitt Company is considering two capital investments. Both investments have an initial cost of $10,000,000 and total net Requirement 3. After further negotiating, the company can now invest with an initial cost of $9,500,000 for both plans Recalculate the NPV and IRR. Which plan, if any should the company pursue? (Use Excel to determine your answers. Use parentheses or a minus sign for a negative NPV. Round the NPV calculations to the nearest whole dollar and the IRR calculations to two decimal places, % ) The NPV (net present value) of Plan Alpha is $ The NPV (net present value) of Plan Bets is 5 The IRR (internal rate of retum) of Plan Alpha is The IRR (internal rate of fetum) of Plan Beta is Which plan If any should the company pursue? A. If the company has sufficient resources and the plans are not mutually exclusive, it should pursue both plans because the NPV is positve and the IRR is greater than the company's required rate of return for both plans If the company must choose only one plan, it should pursue Plan Alpha because it has the lower NPV and IRR Hewitt Company is considering two capital investments. Both investments have an initial cost of $10,000,000 and total net A. If the company has sufficient resources and the plans are not mutually exclusive, it should pursue both plans because the NPV is positive and the IRR is greater than the company's required rate of retum for both plans. If the company must choose only one plan, it should pursue. Plan Alpha because it has the lower NPV and IRR B. The company should not pursue either plan because the NPV is negative and the IRR is less than the company's required rate of return for both plans. C. The company should not pursue either plan because the NPV is positive and the IRR is greater than the company's required rate of retum for both plans D. If the company has sufficient resources and the plans are not mutually exclusive, it should pursue both plans because the NPV is positive and the IRR is greater than the company's required rate of refurn for both plans. If the company must choose only one plan, it should pursue Plan Beta because it has the higher NPV and IRR
