Hanmi Group, a consumer electronics conglomerate, is reviewing its annual budget
ID: 2646556 • 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 11 percent. Further, Hanmi Group has only $33 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 11 percent. Further, Hanmi Group has only $33 million to invest in new projects this year.
Explanation / Answer
a) Profitability index is an investment appraisal technique calculated by dividing the present value of future cash flows of a project by the initial investment required for the project.
B) NPV: Net present value is the present value of net cash inflows generated by a project including salvage value, if any, less the initial investment on the project.
PV of cash flows is calculated as Cash flow / (1+i)^n, where i is the rate of discount here in the question it is 11% and n is the number of year.
Year CDMA PV of cash flows 0 10.00 10.00 1 14.00 12.61 2 10.50 8.52 3 7.50 5.48 PV of cash flows 26.62 PI 2.66Related Questions
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