If Webley uses the profitability index to decide, it would. The cost of capital is 11%. Hint: Therefore sensitivity for savings is – Hint: Found insideProposals with a profitability index of less than 1.00 cannot yield the minimum rate of return because the present value of the projected cash inflows is less than the initial cost. To illustrate use of the profitability index, ... Answer: II. (D) â¹ 1,08,426 Y Ltd. is considering a project with the following cash flow: (B) Its profitability index is 1.653 which is more than 1. When more than one project proposals are evaluated, for selection of one among them, the project with higher profitability index will be selected. B Ltd. is considering the renovation of its one of the department. (D) 6.78% 26. x = 37,501 d. Cannot be determined without more information. Y Ltd. is considering a project which requires an initial investment of â¹ 6,75,000. Question 8 options: 1) The net present value is greater than 1.0. B) B above. (C) Profitability index will be greater than unity (D) Any of the above (D) 11-With limited finance and a number of project proposals at hand, select that package of projects which has (A) The maximum net present value (B) Internal rate of return is greater than cost of capital (C) Profitability index is greater than unity (D) Any of the above (A) PV of cash flow in Year 3 = $4,000 / (1+10%)3 = $3,005. Budget Constraint: If the budget constraints are limited to 2,50,000 then the firm should adopt mode A + C only. 4,500x- 12,000 = 0 Projects require an initial investment of â¹ 1,50,000. 12. (D) â¹ 3,12,318 (D) â¹ 37,501, Question 82. Hint: D. Project's cost of capital is greater than its internal rate of return. Raja & Co. desires to take a project whose cost is t 12,000 and useful life is 4 years. (C) â¹ 1,98,563 (A) 3 years & 7.58 months Expected NPV = 45 (B) â¹ 65,278 The internal rate of return exceeds the required rate of return. the payback period is less than one year. An investment has conventional cash flows and a profitability index of 1.0. (D) â¹ 1,45,452 If a project profitability index is greater than 1.00, we know that its discounted annual net cash inflows are greater than its initial cash investment. B) If we realize that NPV is the present value of the benefits minus the present value of the costs, then we simply need to subtract the costs to the NPV to get the present value of the benefits. Estimated cash flow after tax are as follows: What is the project’s discounted payback period? (B) â¹ 6,690 choose D because it has a lower profitability index. An asset can be written off over 6 years under the straight-line method of depreciation. (C) Machine A because it has higher average CFAT Let the lease rental be âxâ. A) a. A company is considering three methods of attracting customers to expand its business by undertaking – If PI is greater than 1, then NPV is greater than 0 and, conversely, if NPV is greater than 0, then PI is greater than 1. A. The company can take it on lease for 7 years at â¹ 90,000 p.a. Some more product lines are being planned to be added to the existing system. (D) 15.49%, Question 99. d. will never be greater than 1. 正确答案： A. d. unacceptable for investment purposes. (D) â¹ 3,32,000 (B) The IRR is greater than 10%, but less than 14%. (A) 0.42, Question 97. Found inside – Page 337If an investment project has a profitability index of 1.15 , the 1 A. Project's internal rate of return is 15 % . B. Project's cost of capital is greater than its internal rate of return . C. Project's internal rate of return exceeds ... 5. Margin for initial outlay = \(\frac{1,112}{12,000}\) Ã 100 = 9.27% 20,612/2.487 = 8,288 Hint: A project has an IRR in excess of the cost of capital. The initial investment is included when calculating the . It represents an empty area . Hint: (D) 8.97 \(\frac{5,605}{39,945}\) Ã 100 = 14.0396 Hint: If A is carried out, but not B, it has an NPV of â¹ 1,25,000. Hint: 12) Project January has a NPV of $50,000, project December has a NPV of $40,000. What will be the loan installment amount for each year? The following data is available for Project Q: The project requires an initial investment of â¹ 180 Crore. The applicable tax rate is 30% and the WACC of the company is 12%. 12) (C) â¹ 33,603 Found inside – Page 58Projects must have an index number greater than 1.000 to be viable . Funds are allocated to projects starting with the highest profitability index number first , then descending in rank order until the capital is exhausted or until the ... Thus, stepped lease rentals will be as follows: Question 85. The following data is available for Project A whose initial investment is â¹ 50,000 and salvage value after 5 years is â¹ 3,750. b) the project's NPV is greater than zero. 44. b. Hint: (C) 12.56% A â¹ 1,00,000 Prepared by Matthew Will of the University of Indianapolis, the Study Guide contains a thorough list of activities for the student, including an introduction to the chapter, sources of business information, key concepts and terms, sample ...
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