HomeworkLib
Question
a) & b) PLEASE
Machines A and B are mutually exclusive and are expected to produce the following real cash flows. The real opportunity cost of capital is 10% pa. 7. Cash flows (S thousands) CO -100+ 120 C3 C2 +121 +121 C1 Machine +133 +110 a. Calculate the NPV of each machine. (Correct to the neatest cent.) (4 marks) b. Which machine should you buy? Why? (1 mark)
business   finance   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1
a) NPV of Machine A = -100+110/1.1+121/1.1^2 = $     100.00
NPV of Machine B = -120+110/1.1+121/1.1^2+133/1.1^3 = $     179.92
b) Machine B should be bought, as it has higher NPV.
0 0
Add a comment
Know the answer?
Add Answer to:
a) & b) PLEASE Machines A and B are mutually exclusive and are expected to produce...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • Answers listed were wrong Machines A and B are mutually exclusive and are expected to produce...

    Answers listed were wrong Machines A and B are mutually exclusive and are expected to produce the following real cash flows: Cash Flows ($ thousands) Ce C1 C2 Сз Machine A -110 +120 +131 B -80 +90 +80 +70 The real opportunity cost of capital is 10% a. Calculate the NPV of each machine. (Enter your answers in dollars not in thousands. Round your answers to the nearest whole dollar amount.) Machine NPV $ A 125 $ В 81 b....

  • 11. A potential replacement machine, Machine New, is expected to produce the following real cash flows:...

    11. A potential replacement machine, Machine New, is expected to produce the following real cash flows: Machine New Co -120 Cash Flows ($ thousands) C1 +110 C2 +121 C3 +133 The currently used machine, Machine Old, was purchased 5 years ago for $200,000 and produces an annual real cash flow of $80,000. It has no salvage value but is expected to last another 5 years. The company can replace Machine Old with Machine New either now or at the end...

  • Need help with part b. Thank you, Problem 6-8 Equivalent annual cash flows Machines A and...

    Need help with part b. Thank you, Problem 6-8 Equivalent annual cash flows Machines A and B are mutually exclusive and are expected to produce the following real cash flows Cash Flows ($ thousands) C -118 -72 Machine +128 +106 +100 +72 +78 The real opportunity cost of capital is 9% a. Calculate the NPV of each machine. (Do not round intermediate calculations. Enter your answers in dollars not in thousands, e.g 123,456. Round your answers to the nearest whole...

  • 1. Today's stock price reflects investor expectations about the earning power of the firm's current and...

    1. Today's stock price reflects investor expectations about the earning power of the firm's current and future assets. Take Google, for example. All its earnings are plowed back into new invest ments and the stock sells at price of $344. Suppose that the earnings from Google's existing business are expected to stay constant in real terms. Investors are valuing Google's future investment opportunities at $164. Find Google's current earnings per share. (Investors also expect an estimated 7.4% real cost of...

  • We have two independent and mutually exclusive projects, A and B. Project A requires an initial...

    We have two independent and mutually exclusive projects, A and B. Project A requires an initial investment of $1000, and will yield $500 of cash inflows for the next three years. Project B requires an initial investment of $3,500, and will yield $1,000 of cash inflows for the next five years. The required return on both projects is 10%.                                                                                                   (13 marks total) a.  What are the net present values of Project A and Project B?               (2 marks) b.  What is the problem with using...

  • Here are the cash flows for two mutually exclusive projects: Project C0 C1 C2 C3 A...

    Here are the cash flows for two mutually exclusive projects: Project C0 C1 C2 C3 A −$ 21,800 +$ 9,592 +$ 9,592 +$ 9,592 B − 21,800 0 0 + 29,430 What is the IRR of each project? (Round your answers to 2 decimal places.)

  • Here are the cash flows for two mutually exclusive projects: Project C0 C1 C2 C3 A...

    Here are the cash flows for two mutually exclusive projects: Project C0 C1 C2 C3 A −$ 21,800 +$ 9,592 +$ 9,592 +$ 9,592 B − 21,800 0 0 + 29,430 What is the IRR of each project? (Round your answers to 2 decimal places.)

  • Here are the cash flows for two mutually exclusive projects: Project Co C1 $ 39,200 +$15,700...

    Here are the cash flows for two mutually exclusive projects: Project Co C1 $ 39,200 +$15,700 - 39,2000 C2 +$15,700 0 C3 +$ 15,700 + 49,200 B a. Given the following interest rates (0%, 2%, 4%, 6%, 8%, 10%, 12%, 14%, 16%, 18%, 20%), above what interest rates would you prefer project A to B? Interest rates above % b. What is the IRR of each project? (Round your answers to 2 decimal places.) Project Project B IRR %

  • Consider two mutually exclusive projects A and B: Cash Flows (dollars) Project C0 C1 C2 NPV...

    Consider two mutually exclusive projects A and B: Cash Flows (dollars) Project C0 C1 C2 NPV at 11% A −36,500 26,200 26,200 +$8,368 B −56,500 39,500 39,500 +11,145 a. Calculate IRRs for A and B. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.) b. Which project does the IRR rule suggest is best? Project A Project B c. Which project is really best?

  • Bagel Pantry Inc. is considering two mutually exclusive projects with widely differing lives. The company's cost...

    Bagel Pantry Inc. is considering two mutually exclusive projects with widely differing lives. The company's cost of capital is 12%. The project cash flows are summarized as follows: Project A Project B C0 $(25,000) $(23,000) C1 14,742 6,641 C2 14,742 6,641 C3 14,742   6,641 C4 6,641 C5 6,641 C6 6,641 C7 6,641 C8 6,641 C9 6,641 a. Compare the projects using payback. b. Compare the projects using NPV. c. Compare the projects using IRR. d.Compare the projects using the replacement...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT