Please review my answers and
solve the highlighted part in yellow please:Assume you have a capital budget of $300 and the following profitability
indices and costs for five possible projects:a.)Which combination of projections maximizes NPV?[Show calculations.]
NPV = PI*CA.1.45*100=145B.1.4*150=210C.1.35*175=236.25D.1.2*100=120E.1.1*25=27.5***Best combination would be A+D+E = $292.5 leaving $7.5 for dividends/buybackb)Would the ranking change if the PI for Project E was
1.18?Why?NO ranking would not change as 1.18*25=
29.5A+D+E = 294.5 still leaving $5.5 for
dividends/buybacksc)
Describe carefully what analysis must precede reliable PI
estimates.NOT
SURE: PI = NPV/Cost ???9)The annual cash flows savings from investing for $75 in
a piece of equipment in year zero lasting four years has the following cash
flow estimates:
a.Cash flow payback [show calculations}Year 1: 75-50 = 25Year 2: 25/75=.33Cash Flow Payback = 2.33 Yearsb.
Discounted payback period at 10%
c.
NPV at 10%?
Which measure is best and why?
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