You are considering two independent projects, Project A and Project B. The initial cash outlay associated with project A is RM50,000 and the initial cash outlay associated with project B is RM70,000. The required rate of return on both project is 12 percent. The expected annual free cash flows from each project are as follows Year Project A Project B 1 -RM50,000 -RM70,000 2 12,000 13,000 3 12,000 13,000 4 12,000 13,000 12,000 13,000 6. 12,000 13,000 Calculate the NPV, PI, and IRR for each project and indicate if the project should be accepted.

Q: PI of a project tha

A: PI (Profitability Index) is defined as one of the techniques of capital budgeting. This technique…

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A: To open the "NPV function" window - MS-Excel --> Formulas --> Financials --> NPV.

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A: Solution:- Net Present Value (NPV) means the net present value of cash inflows after adjusting…

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A: Payback period: Payback period is the length of time in which an investment reaches its break-even…

Q: A project requires an initial investment of $225,000 and is expected to generate the following net…

A: NPV or net present value is an important capital budgeting tool. It is used to determine if a…

Q: a. Project L requires an initial outlay at t = 0 of $48,817, its expected cash inflows are $10,000…

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A: IRR refers to the internal rate of return and it is that rate at which NPV is nil. NPV (net present…

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A: Given information: Initial investment amount is OMR 900,000 Required rate of return is 10%

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A: This method of Net Present Value (NPV) uses a specified discount rate to bring all subsequent net…

Q: (d) Now suppose that your discount rate is 5% per year for both projects. If projects A and B are…

A: NPV is Net Present Value of the Cash Flows. Payback Period the Period in which the initial…

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A: The discounted cash payback period is the time required to recover the initial investment. It is…

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A: project A B IRR 35.00% 30.00% CROSS OVER RATE 20.00%

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A: IRR is the rate at which Present value of cash Inflows is equal to Present Value of cash Inflows.…

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A: FORMULA NPV = [CF*(1-(1+R)-N)/R]-CF0 Where NPV - Net present value CF - Annual cash inflow i.e.…

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A: a. NPV is net present value i.e. sum of all cash flows discounted at cost of capital.

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A: Formulas:

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A: YEAR PROJECT A PROJECT B 0 -$275,000 -$202,000 1 0 113,600 2 0 81,900 3 360,000 47,000

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A: The question gives the following information:

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Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.