Your boss asks you to review a recent analysis that was done to compare three...

80.2K

Verified Solution

Question

Finance

imageimage

Your boss asks you to review a recent analysis that was done to compare three alternative proposals to enhance the firm's manufacturing facility. You find that the prior analysis ranked the proposals according to their IRR, and recommended the highest IRR option, Proposal A. You decide to redo the analysis using NPV to determine whether this recommendation was appropriate. But while you are confident the IRRs were computed correctly, it seems that some of the underlying data regarding the cash flows that were estimated for each proposal was not included in the report. For Proposal B, you cannot find information regarding the total initial investment that was required in Year 0. And for Proposal C, you cannot find the estimated cashflow in Year 3. Here is the information you have (in $ millions): IRR Year 0 Year 1 Year 2 Year 3 Proposal A 60.0% 56.7% 53.3% B - $100 ? - $100 $30 $0 $37 $153 $206 $0 $88 $95 C ? Suppose the appropriate cost of capital for each alternative is 10%. Using this information, determine the NPV of each proposal. Which project should the firm choose? Fill in the missing values ($ millions). (Round to two decimal places.) IRR Year 0 Year 1 Year 2 Year 3 Proposal A 60.0% $30 $153 $88 - $100 $ B 56.7% $0 $206 $95 53.3% - $100 $37 $0 $ Suppose the appropriate cost of capital for each alternative is 10%. Using this information, determine the NPV of each proposal. The NPV for proposal A is $ million. (Round to two decimal places.) The NPV for proposal B is $ million. (Round to two decimal places.) The NPV for proposal C is $ million. (Round to two decimal places.) Which project should the firm choose? The firm should choose (Select from the drop-down menu.)

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!
Become a Member

Other questions asked by students