6a- Your firm is evaluating a capital budgeting project. The estimated cash flows appear below. The...

6a- Your firm is evaluating a capital budgeting project. The estimated cash flows appear below. The board of directors wants to know the expected impact on shareholder wealth. Knowing that the estimated impact on shareholder wealth equates to net present value (NPV), you use your handy calculator to compute the value. What is the project's NPV? Assume that the cash flows occur at the end of each year. The discount rate (i.e., required rate of return, hurdle rate) is 15.2%. (Round to nearest penny)

Year 0 cash flow	-98,000
Year 1 cash flow	39,000
Year 2 cash flow	47,000
Year 3 cash flow	53,000
Year 4 cash flow	38,000
Year 5 cash flow	29,000

Answer:

6b- Your firm has limited capital to invest and is therefore interested in comparing projects based on the profitability index (PI), as well as other measures. What is the PI of the project with the estimated cash flows below? The required rate of return is 15.0%. Round to 3 decimals.

Year 0 cash flow = -710,000
Year 1 cash flow = -110,000
Year 2 cash flow = 410,000
Year 3 cash flow = 440,000
Year 4 cash flow = 430,000
Year 5 cash flow = 470,000

Answer:

6c- What is the discount rate at which the following cash flows have a NPV of $0? Answer in %, rounding to 2 decimals.

Year 0 cash flow = -160,000
Year 1 cash flow = 45,000
Year 2 cash flow = 31,000
Year 3 cash flow = 34,000
Year 4 cash flow = 30,000
Year 5 cash flow = 33,000
Year 6 cash flow = 38,000

Answer:

Expert Solution

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