Financial Management: Principles and Applications

Caledonia is considering two additional mutually exclusive objects. The hard up-to-dateness flows associated with these visualizes are as follows: YEARPROJECT APROJECT B 0$100,000$100,000 132,0000 232,0000 332,0000 432,0000 532,000$200,000 The require gait of reproduction on these projects is 11 percent. a.What is each projects vengeance period? b.What is each projects lowest present value? c.What is each projects innate rate of upshot? d.What has caused the ranking conflict? e.Which project should be accepted? Why? PROJECT A PP =100,000/32,000= 3.125 IRR = 18.03 NPV a = 32,000( 1/ (1 + .11)1) 100,000 = 18,268.70 PI = 160,000/ 100,000= 1.6 reckon A CFo = -100,000 F1 = 5 CF1 = 32,000 = 18,268.70 authorise PRESENT VALUE wander AProject B capital coalesceCash Flow Initial Outlay-100,000Initial Outlay -100,000 stratum 132,000Year 10 Year 232,000Year 2 0 Year 332,000Year 30 Year 432,000Year 40 Year 532,000Year 5 200,000 PV$118,268.70 PV$118,690.27 -100,000.00-100,000 NPV=18,268.70NPV=18,690.

27 INTERNAL RATE OF RETURN socio-economic classproject A socio-economic classProject B 0--1000000-100000 13200010 23200020 33200030 43200040 5320005200000 18.03%14.87% The conflict is started by the projects containing two different cash flows in different periods of time. The return cash flows of Project A looks to be consistent over the course of five geezerhood aft(prenominal) the initial $100,000 investment. They are receiving almost a 1/3 of the original investment back every year and and so can rec over more quickly. Project B has an fast in! vestment of $100,000 with no return until year 5. Although Project B seems to be the better deal, Project A is the beat come to the fore value. Based on the following information that was gathered from retribution period, net present value and internal rate of return on project A and project B the opera house hat accepted exclusive project that...If you want to embark on a full essay, order it on our website: BestEssayCheap.com

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