of next year The dividend to be pad then level off to a 4 percent growth rate re
ID: 1175285 • Letter: O
Question
of next year The dividend to be pad then level off to a 4 percent growth rate return of 10 What Ir the stock is trading at $25.00 would it be a good bay? Question 3-30pts Consider the following two mutual exclusive projects Cash flow A -500,000 170,000 180,000 195,000 250,000 Year Cash flow B -500,000 220,000 320,000 200,000 325,000 whichever project you choose ifany, would require a 6% return on your investment a) Ifyou apply the playback criteria, which project will you choose? Why? b) If you apply the discounted payback criteria, which project will you choose? Why? c) If you apply the NPV payback criteria, which project will you choose? Why? d) If you apply the IRR payback criteria, which project will you choose? Why? e) Ifyou apply the Profitability payback criteria, which project will you choose? Why Based on your answers in (a) through (e) which project will you finally choose? Why Question 3-15ptsExplanation / Answer
As per policy, only four parts of a question is allowed to answer at a time, so answering a to d here:
Q3) Year CF A CF B 6% 7% Pv - A 6% Pv - B 6% Pv - A 7% Pv - B 7% 0 -500000 -500000 -500000 -500000 0 0 1 170000 220000 0.943 0.935 160310 207460 158950 205700 2 180000 320000 0.89 0.873 160200 284800 157140 279360 3 195000 200000 0.84 0.816 163800 168000 159120 163200 4 250000 325000 0.792 0.763 198000 257400 190750 247975 NPV 182310 417660 IRR use 682310 917660 665960 896235 a) two years total 350000 540000 CHOOSEN CFB b) three years total 484310 660260 CHOOSEN CFB c) NPV 182310 417660 CHOOSEN CFB d) IRR - A= 6+(682310-500000)/(682310-665960) =17.15% IRR - B = 6+(917660-500000)/(917660-896235)=25.49% CHOOSEN CFB Thus, in total we have to choose Cash Flow B.Related Questions
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