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Please answer as many as possible from C-J Tankyou Provide an evaluation of two proposed projects, both with 5-year expected Ilves and Identical initial outlays
Please answer as many as possible from C-J Tankyou
Provide an evaluation of two proposed projects, both with 5-year expected Ilves and Identical initial outlays of $110,000. Both of these projects involve additions to Caledonia's highly successful Avalon product line, and as a result, the required rate of return on both projects has been established at 11 percent. The expected free cash flows from each project are shown in the popup window: In evaluating these projects, please respond to the following questions: a. Why is the capital-budgeting process so important? b. Why is it difficult to find exceptionally profitable projects? c. What is the payback period on each project? If Caledonia imposes a 4-year maximum acceptable payback period, which of these projects should be acceplod? d. What are the criticisms of the payback period? e. Determine the NPV for each of these projects. Should either project be accepted? f. Describe the logic behind the NPV. g. Determine the PI for each of these projects. Should either project be accepted? h. Would you expect the NPV and Pl methods to give consistent accept reject decisions? Why or why not? i. What would happen to the NPV and Pl for each project if the required rate of return increased? If the required rate of return decreased? j. Determine the IRR for each project. Should elther project be accepted? a. The capital-budgeting process is so important because capital-budgeting decisions involve investments requiring rather large cash outlays at the beginning of the life of the project and commit the firm to a particular course of action over a relatively long time horizon. (Select from the drop-down menus.) b. Why is it difficult to find exceptionally profitable projects? (Select the best choice below.) i Data Table (Click on the following icon in order to copy its contents into a spreadsheet.) O A. The costs of implementing capital budgeting decisions are extremely high B. The existence of competition may drive price and profit down quickly. O C. There is no reliable method to accurately estimate a project's future cash flows OD. The lack of effective investment criteria makes profitable projects hard to find. c. What is the payback period on project A? 3.12 years (Round to two decimal places.) Initial outlay Inflow year 1 Inflow year 2 Inflow year 3 Inflow year 4 Inflow year 5 PROJECTA -$110,000 30,000 40,000 50,000 50,000 60.000 PROJECT B $110.000 50.000 50,000 50,000 50.000 50.000 Print Done unuirano al Chank nomirStep by Step Solution
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