Manager Cafe "Daiton" is considering investing in 2 (two) projects. Project X is an investment...
50.1K
Verified Solution
Link Copied!
Question
Accounting
Manager Cafe "Daiton" is considering investing in 2 (two) projects. Project X is an investment of $ 75,000 to replace its refrigeration equipment works but outdated / outdated. Project Y is an investment of $ 1,500,000 expand the dining room facilities. Cash flow data is relevant for both projects for 2 years are expected to be as follows: a. Compute: Expected value, standard deviation, and coefficient of variation for cash flows of each project. b. Calculate: Risk-adjusted NPV for each project using cost of capital 15% for riskier projects, and cost of capital 12% for less risky projects. Which project is more profitable with using the NPV criteria? c. Calculate: PI for each project, and rank the projects according to the criteria PI. d. Compute: IRR for each project, and rank projects accordingly IRR criteria. e. Compare your answers to b, c, and d, and discuss any differences.
Project X Year 1 Year 2 Probability Cash Flow Probability Cash Flow 0.16 $0 0.08 $0 0.66 50000 0.82 50000 0.18 100000 0.10 100000 Project Y Year 1 Year 2 Probability Cash Flow Probability Cash Flow 0.50 $0 0.13 $0 0.50 200000 0.74 100000 0.13 200000
Answer & Explanation
Solved by verified expert
Get Answers to Unlimited Questions
Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!
Membership Benefits:
Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
