Question

In: Finance

Light Sweet Petroleum, Inc., is trying to evaluate a generation project with the following cash flows:...

Light Sweet Petroleum, Inc., is trying to evaluate a generation project with the following cash flows:

  

Year Cash Flow
0 –$ 38,000,000
1 62,000,000
2 – 11,000,000

What is the NPV for the project if the company requires a return of 11 percent?

Should the company accept this project?

Fill in the blank: This project has two IRR's namely, ______ percent and _______ percent, in order from smallest to largest.

Solutions

Expert Solution

Ans NPV = $ 8588010.20

The Project should be accepted since NPV is positive

Year Project Cash Flows (i) DF@ 11% DF@ 11% (ii) PV of Project A ( (i) * (ii) ) DF@ 42.901% (iii) PV of Project A ( (i) * (iii) )
0 -38000000 1 1           (3,80,00,000.00) 1    (3,80,00,000.00)
1 62000000 1/((1+11%)^1) 0.893            5,53,57,142.86 0.700     4,33,86,680.29
2 -11000000 1/((1+11%)^2) 0.797              (87,69,132.65) 0.490       (53,86,692.06)
NPV                85,88,010.20 NPV                    (11.77)

IRR is 42.901%

jeff jeffy answered 8 months ago
Next > < Previous

Related Solutions

Light Sweet Petroleum, Inc., is trying to evaluate a generation project with the following cash flows:...
Light Sweet Petroleum, Inc., is trying to evaluate a generation project with the following cash flows: Year 0 –$ 38,400,000 1- 62,400,000 2 – 11,400,000 a-1 What is the NPV for the project if the company requires a return of 10 percent? a-2 Should the company accept this project? Yes or No? b. The project has two IRR'S, namely _____ percent and _____ percent, in order from smallest to largest
Hitch Petroleum. Inc. is trying to evaluate a generation project with the following cash flows:                           &n
Hitch Petroleum. Inc. is trying to evaluate a generation project with the following cash flows:                             Year                      Cash Flow                                0                           -$20,000                                1                              40,000                                2                             -10,000 Compute the MIRR for this project using an 8% discount rate.
Cutler Petroleum, Inc., is trying to evaluate a generation project with the following cash flows Year...
Cutler Petroleum, Inc., is trying to evaluate a generation project with the following cash flows Year Cash Flow 0 –$ 38,500,000 1 62,500,000 2 – 11,500,000    a-1 What is the NPV for the project if the company requires a return of 12 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)      NPV $    a-2 Should the firm accept this project? No Yes    b. This project has two IRRs, namely...
Bohrer Mining, Inc., is trying to evaluate a project with the following cash flows: Year Cash...
Bohrer Mining, Inc., is trying to evaluate a project with the following cash flows: Year Cash Flow 0 –$ 38,500,000 1 62,500,000 2 – 11,500,000 a-1 What is the NPV for the project if the company requires a return of 12 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) NPV $ a-2 Should the firm accept this project? Yes No b. This project has two IRRs, namely____ percent and ____ percent, in...
A project manager is trying to ascertain a discounting rate for the project cash flows that...
A project manager is trying to ascertain a discounting rate for the project cash flows that carry the same risk as the core business of the firm. The manager has been told by the finance team at the firm that the current capital structure has a debt to value ratio of 0.3, however, they are targeting a ratio of 0.25 to get a better credit rating. The better credit rating would reduce the cost of debt to 7%. The current...
Blinding Light Co. has a project available with the following cash flows: Year Cash Flow 0...
Blinding Light Co. has a project available with the following cash flows: Year Cash Flow 0 −$32,830 1 8,390 2 10,130 3 14,540 4 16,170 5 11,180 What is the project's IRR? Multiple Choice 23.32% 24.25% 20.15% 24.87% 22.39%
Blinding Light Co. has a project available with the following cash flows: Year Cash Flow 0...
Blinding Light Co. has a project available with the following cash flows: Year Cash Flow 0 −$35,390 1 7,910 2 9,490 3 13,420 4 15,530 5 10,220 What is the project's IRR?
Apple Inc. is evaluating Project Vanguard with the following cash flows:
Apple Inc. is evaluating Project Vanguard with the following cash flows: Year 0 1 2 3 4 Cash Flow ($m) -80 10 20 35 40 (i)  Use the payback rule to determine whether the company should accept the project or not if its payback period cutoff is 4 years. (ii) Use the IRR rule to determine whether the company should accept the project or not if its cost of capital is 10%. (iii) Use the NPV rule to determine whether...
A project has the following cash flows:
A project has the following cash flows:YearCash Flow0–$16,60017,30028,60037,100   a.What is the NPV at a discount rate of zero percent? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)b.What is the NPV at a discount rate of 12 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)c.What is the NPV at a discount rate of 19 percent? (A negative answer should be indicated by a minus sign. Do...
A project has the following cash flows:
A project has the following cash flows:    Year Cash Flow 0 $ 39,500 1 – 18,500 2 – 29,500    What is the IRR for this project? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)      IRR %    What is the NPV of this project, if the required return is 11 percent? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT