4- The following data on two mutually exclusive projects are lower than consideration by the CGC Company:
Year Project A Project B
0 -30,000 -60,000
1 10,000 20,000
2 10,000 20,000
3 10,000 20,000
4 10,000 20,000
5 10,000 20,000
The cost of capital is 14%
Calculate the following values for respectively project using the time value table:
1- NPV
2- Profitability index
3- Payback period
4- Which project would you adopt and why?
5- The following table show betas for several companies. Calculate each stocks expected rate of return using the CAPM. Assume the risk-free rate of interest is 5%. Use a 9% risk premium for the flea market portfolio.
Company Beta
Sams 2.03
Walmart 1.36
JC Penney .40
Cotsco .84
Answers: Question 4:
NPV: (A) $4,330 (B) $8,660
Profitability index: (A) 0.144 (B) 0.144
Payback period: (A) 3 years (B) 3 years
Since profitabilty index and payback interval are the same for both projects but Project B have a higher network present value, Project B is the preferred choice.
O.O
I have this exact same question surrounded by 8th grade..
didnt even try xD
Year Project A Project B
0 -30,000 -60,000
1 10,000 20,000
2 10,000 20,000
3 10,000 20,000
4 10,000 20,000
5 10,000 20,000
The cost of capital is 14%
Calculate the following values for respectively project using the time value table:
1- NPV
2- Profitability index
3- Payback period
4- Which project would you adopt and why?
5- The following table show betas for several companies. Calculate each stocks expected rate of return using the CAPM. Assume the risk-free rate of interest is 5%. Use a 9% risk premium for the flea market portfolio.
Company Beta
Sams 2.03
Walmart 1.36
JC Penney .40
Cotsco .84
Answers: Question 4:
NPV: (A) $4,330 (B) $8,660
Profitability index: (A) 0.144 (B) 0.144
Payback period: (A) 3 years (B) 3 years
Since profitabilty index and payback interval are the same for both projects but Project B have a higher network present value, Project B is the preferred choice.
O.O
I have this exact same question surrounded by 8th grade..
didnt even try xD