Calculate the project cash flow generated for Project A and Project B using the NPV method...

Calculate the project cash flow generated for Project A and Project B using the NPV method (Show your calculations): . Project A: Invest $10k today and receive $5k at the end of this year and for another 2 years (in 12 mos, in 24 mos, in 36 mos), for total cash inflows of $15k. Project B: Invest $55k today and receive $20k at the end of this year and for another 2 years (in 12 mos, in 24 mos, in 36 mos), for total cash inflows of $60k.

Discount rate = 10%

Expert Solution

Project A

Net present value is calculated using a financial calculator by inputting the below:

Press the CF button.
CF0= -$10,000. It is entered with a negative sign since it is a cash outflow.
Cash flow for each year should be entered.
Press Enter and down arrow after inputting each cash flow.
After entering the last cash flow cash flow, press the NPV button and enter the discount rate of 10%.
Press enter after that. Press the down arrow and CPT buttons to get the net present value.

The net present value of cash flows is $2,434.26.

Project B

Net present value is calculated using a financial calculator by inputting the below:

Press the CF button.
CF0= -$55,000. It is entered with a negative sign since it is a cash outflow.
Cash flow for each year should be entered.
Press Enter and down arrow after inputting each cash flow.
After entering the last cash flow cash flow, press the NPV button and enter the discount rate of 10%.
Press enter after that. Press the down arrow and CPT buttons to get the net present value.

The net present value of cash flows is $5,262.96.

In case of any query, kindly comment on the solution.

jeff jeffy answered 5 months ago

Calculate the project cash flow generated for Project A and Project B using the NPV method....

Calculate the project cash flow generated for Project A and Project B using the NPV method. Which project would you select, and why? Which project would you select under the payback method? The discount rate is 10% for both projects. Use Microsoft® Excel® to prepare your answer. Note that a similar problem is in the textbook in Section 5.1. Sample Template for Project A and Project B: “Table showing investments and returns for Project A and Project B. Project A...

calculate the NPV for the following: the project costs $50,000 upfront and cash flow is $13,000...

calculate the NPV for the following: the project costs $50,000 upfront and cash flow is $13,000 per year for the next six years. Use a 9% discount rate.

NPV profile of a project. Given the following cash flow of Project L-2, draw the NPV...

NPV profile of a project. Given the following cash flow of Project L-2, draw the NPV profile. Hint: Be sure to use a discount rate of zero for one intercept (y-axis) and solve for the IRR for the other intercept (x-axis). Year 0 -$250,000 Year 1 $49,000 Year 2 $80,000 Year 3 $114,000 Year 4 $139,000 What is the NPV of Project L-2 where zero is the discount rate? What is the IRR of Project L-2? Which of the graphs...

Calculate the NPV for Project A and accept or reject the project with the cash flows...

Calculate the NPV for Project A and accept or reject the project with the cash flows shown below if the appropriate cost of capital is 7% Project A Time 0 1 2 3 4 5 Cash Flow -990 350 480 500 630 120 2) Calculate the NPV for project L and recommend whether the company should accept or reject the project. Cost of Capital is 6% Project L Time 0 1 2 3 4 5 Cash Flow - 8,600 ...

PREPARE A CASH FLOW USING THE DIRECT METHOD

DIRECT Method RichCorp Income Statement FYE 12/31/19 Revenues 445,000.00 Cost of Goods Sold (232,500.00) Operating Expenses (110,500.00) Interest Expense (6,000.00) Loss on sale of equipment (1,000.00) (350,000.00) Income before income taxes 95,000.00 Income tax expense (32,500.00) Net Income 62,500.00 COMPARATIVE BALANCE SHEET 12/31/2019 12/31/2018 Cash 27,000 18,500.00 Accounts Receivable 34,000 13,000.00 Inventory 27,000 - Prepaid Insurance 2,000 3,000.00 Land 22,500 35,000.00 Buildings 100,000 100,000.00 Equipment 96,500 34,000.00 309,000 203,500.00 Accumulated Depreciation, Buildings 10,500 5,500.00 Accumulated Depreciation, Equipment 14,000 5,000.00 Accounts...

(a) Develop proforma Project Income Statement Using Excel Spreadsheet (b) Compute Net Project Cash flows, NPV,...

(a) Develop proforma Project Income Statement Using Excel Spreadsheet (b) Compute Net Project Cash flows, NPV, IRR and PayBack Period (c) Develop Problem-Solving and Critical Thinking Skills 1) Life Period of the Equipment = 4 years 8) Sales for first year (1) $ 200,000 2) New equipment cost $ (200,000) 9) Sales increase per year 5% 3) Equipment ship & install cost $ (35,000) 10) Operating cost: $ (120,000) 4) Related start up cost $ (5,000) (60 Percent of...

How is the net present value (NPV) calculated for a project with a conventional cash flow...

How is the net present value (NPV) calculated for a project with a conventional cash flow pattern, and what are the acceptance criteria for NPV, how are they related to the firm’s market value with explanation of the similarities and differences between NPV, PI, and EVA. PLEASE MINIMUM 350 WORDS.

you are to find a business for sale, project the cash flows, and calculate the NPV...

you are to find a business for sale, project the cash flows, and calculate the NPV to determine whether the business is worth buying based on NPV and your overall evaluation. You may wish to visit a business broker website as they list businesses for sale, usually provide latest year cash flow and the price of the business. You need to: 1. Qualitatively assess the business. Why is it viable in the long run? If it’s not then choose another...

Profitability index Estimating the cash flow generated by $1 invested in a project The profitability index...

Profitability index Estimating the cash flow generated by $1 invested in a project The profitability index (PI) is a capital budgeting tool that is defined as the present value of a project’s cash inflows divided by the absolute value of its initial cash outflow. Consider this case: Happy Dog Soap Company is considering investing $2,225,000 in a project that is expected to generate the following net cash flows: Year Cash Flow Year 1 $275,000 Year 2 $500,000 Year 3 $450,000...

11. Profitability index Estimating the cash flow generated by $1 invested in a project The profitability...

11. Profitability index Estimating the cash flow generated by $1 invested in a project The profitability index (PI) is a capital budgeting tool that is defined as the present value of a project’s cash inflows divided by the absolute value of its initial cash outflow. Consider this case: Purple Whale Foodstuffs is considering investing $2,750,000 in a project that is expected to generate the following net cash flows: Year Cash Flow Year 1 $350,000 Year 2 $500,000 Year 3 $425,000...

Question