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Question;Profitability Index versus NPV Hanmi Group, a consumer;electronics conglomerate, is reviewing;its annual budget in wireless technology. It is considering investments in three different technologies to develop;wireless communication devices. Consider the following cash flows of the three;independent projects for Hanmi. Assume the discount rate for Hanmi is 10;percent. Further, Hanmi Group has only $20 million to invest in new projects;this year;Cash Flows (in $ millions);Year;CDMA;G4;Wi-Fi;0;-8;-12;-20;1;11;10;18;2;7.5;25;32;3;2.5;20;20;a. Based on the profitability index decision;rule, rank these investments.;b. Based on the NPV, rank these investments.;c. Based on your;findings in (a) and (b), what would you recommend to the CEO of Hanmi Group and;why?;16. Comparing Investment Criteria Consider the following;cash flows of two mutually exclusive;projects for AZ-Motorcars. Assume the discount rate for AZ-Motorcars is 10 percent.;Year;AZM Mini-SUV;AZF Full-SUVG4;0;-450000;-800000;1;320000;350000;2;180000;420000;3;150000;290000;a. Based;on the payback period, which project should be accepted?;b. Based on the NPV;which project should be accepted?;c. Based on the IRR;which project should be accepted?;d. Based on this;analysis, is incremental IRR analysis necessary?;16.;Comparing Investment Criteria Consider the following cash flows of two mutually;exclusive projects for AZ-Motorcars. Assume the discount rate for;AZ-Motorcars is;10 percent.;Year;AZM Mini-SUV;AZF Full-SUVG4;0;-450000;-800000;1;320000;350000;2;180000;420000;3;150000;290000;a. Based;on the payback period, which project should be accepted?;b. Based on the NPV, which project should be;accepted?;c. Based on the IRR, which project should be;accepted?;d. Based on this analysis, is incremental IRR;analysis necessary? If yes, please conduct the analysis.;Question;Project Analysis and Inflation Sanders Enterprises, Inc.;has been considering the purchase of a;new manufacturing facility for $270,000. The facility is to be fully depreciated on a straight-line basis over;seven years. It is expected to have no resale value after the seven years.;Operating revenues from the facility are expected to be $105,000, in nominal;terms, at the end of the first year. The revenues are expected to increase at;the inflation rate of 5 percent. Production costs at the end of the first year will;be $30,000, in nominal terms, and they are expected to increase at 6 percent;per year. The real discount rate is 8 percent. The corporate tax rate is 34;percent. Sanders has other ongoing profitable operations. Should the company;accept the project?

 

Paper#42060 | Written in 18-Jul-2015

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