Hanmi Group, a consumer electronics conglomerate, is reviewing its annual budget
ID: 2646446 • Letter: H
Question
Hanmi Group, a consumer electronics conglomerate, is reviewing its annual budget in wireless technology. It is considering investments in three different technologies to develop wireless communication devices. Consider the following cash flows of the three independent projects for Hanmi. Assume the discount rate for Hanmi is 8 percent. Further, Hanmi Group has only $16 million to invest in new projects this year.
Hanmi Group, a consumer electronics conglomerate, is reviewing its annual budget in wireless technology. It is considering investments in three different technologies to develop wireless communication devices. Consider the following cash flows of the three independent projects for Hanmi. Assume the discount rate for Hanmi is 8 percent. Further, Hanmi Group has only $16 million to invest in new projects this year.
Explanation / Answer
FIN Q 14523
NPV = PV of all cash outflows and inflows
Accordingly, NPV of the projects are as follows:
Profitability Index = PV of all cash inflows / PV of all cash outflows
So PI for the 3 projects:
CDMA
G4
WIFI
PV of Cash Inflows
8.89
40.75
49.60
PV of Cash Outflows
4
12
16
PI
2.22
3.40
3.10
CDMA
G4
WIFI
PV of Cash Inflows
8.89
40.75
49.60
PV of Cash Outflows
4
12
16
PI
2.22
3.40
3.10
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