P10-25 (similar to) Cuestion All techniques with NPV profile Mutually exclusive
ID: 2792234 • Letter: P
Question
P10-25 (similar to) Cuestion All techniques with NPV profile Mutually exclusive projects Projects A and B, of equal risk, are alternatives for expanding Rosa Company's capacity. The firm cost of capital is 12%. The cash flows for each project are shownin the following table Data Table a. Calculate each project's payback period b. Calculate the net present value (NPV) for each project. c. Calculate the internal rate of retum (RR) for each project d. Indicate which project you would recommend (Click on the icon located on the top-right corner of the data table b a. The payback period of project A is years. (Round to two decimal places) copy its contents into a spreadsheet ) Project AProject B $130,000$100,000 Initial investment (CFo) Year (t) Cash inflows (CF) $30,000$30 000 $30,000 $30.000 530.000 $30,000 $35,000 $40,000 $45,000 $50,000 check Answer Print one Pemsining To see what to study next go to your SNExplanation / Answer
Project A
Using Financial Calculator
CF0=-130000 (press enter) [Press down Key]
CF1= 30000 (press enter) [Press down Key]
F01=1 (press enter) [Press down Key]
CF2= 35000 (press enter) [Press down Key]
F02=1 (press enter) [Press down Key]
CF3= 40000 (press enter) [Press down Key]
F03=1 (press enter) [Press down Key]
CF4= 45000 (press enter) [Press down Key]
F04=1 (press enter) [Press down Key]
CF5= 50000 (press enter) [Press down Key]
F05=1 (press enter) [Press down Key]
Press NPV
Interest =12
Scroll down
Press CPT and NPV
NPV=10128.37
Press down key twice+ Press CPT
Payback period=3.5555 years
Press IRR key+ press CPT
IRR=14.83%
Project B
Using Financial Calculator
CF0=-100000 (press enter) [Press down Key]
CF1= 30000 (press enter) [Press down Key]
F01=5 (press enter) [Press down Key]
Press NPV
Interest =12
Scroll down
Press CPT and NPV
NPV=8143.29
Press down key twice+ Press CPT
Payback period=3.33 years
Press IRR key+ press CPT
IRR=15.24%
Decision: Accept project A on basis of higher NPV
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