Question
In: Finance
A firm considers a project with the following cash flows: time-zero = -120,000, years 1-4 =...
A firm considers a project with the following cash flows: time-zero = -120,000, years 1-4 = 55,500, and the fifth year -90,000. Should the project be accepted if the cost of capital is 9%?
| a. |
No, the PI of the project is less than 1 |
|
| b. |
No, the MIRR of the project is 9.16%. |
|
| c. |
Yes, the IRR of the project is 10.04%. |
|
| d. |
Yes, the NPV of the project is $1,310.63 |
Solutions
jeff jeffy answered 2 years agoRelated Solutions
A firm with a cost of capital of 10% considers the following capital investment: Cash Flows:...
A firm with a cost of capital of 10% considers the following
capital investment:
Cash Flows: Year 0 -4 million Year
1 26.5 Million Year 2 -24.2 Million
(A) According to the IRR given by your financial calculator,
should the firm accept this project?
(B) Up to how many IRRs could this project have?
(C) According to the MIRR, should the firm accept this
project?
(D) Should the firm accept this project? Justify your answer
using the NPV. (Please show...
Waste Industries is evaluating a $55,500 project with the following cash flows. Years Cash Flows 1...
Waste Industries is evaluating a $55,500 project with the
following cash flows.
Years Cash Flows
1 $ 9,120
2 20,200
3 26,600
4 16,300
5 26,300
The coefficient of variation for the project is 0.475.
Coefficient of Variation
Discount Rate
0
−
0.25
7
%
0.26
−
0.50
9
%
0.51
−
0.75
13
%
0.76
−
1.00
16
%
1.01
−
1.25
19
%
Use Appendix B for an approximate answer but calculate your
final answer using the formula...
Waste Industries is evaluating a $56,900 project with the following cash flows. Years Cash Flows 1...
Waste Industries is evaluating a $56,900 project with the
following cash flows.
Years
Cash Flows
1
$
9,710
2
19,200
3
26,500
4
19,800
5
27,300
The coefficient of variation for the project is 0.443.
Coefficient of Variation
Discount Rate
0
−
0.25
7
%
0.26
−
0.50
9
%
0.51
−
0.75
13
%
0.76
−
1.00
16
%
1.01
−
1.25
19
%
Use Appendix B for an approximate answer but calculate your
final answer using the formula...
You are given the following cash flows for the project: Time 0 Time 1 Time 2...
You are given the following cash flows for the project:
Time 0
Time
1
Time
2
Time
3
Time
4
-115,000
30,000
50,000
50,000
20,000
If the If the
required rate of return is 13%, (1) what is the payback period, (2)
what is the NPV, (3) what is the IRR, and (4) what is the
Profitability Index (PI). Should we accept the project?
Project A has the following Cash Flows: Cost = $1,200,000; Cash flows the following years as...
Project A has the following Cash Flows: Cost = $1,200,000; Cash
flows the following years as follows: Year 1 = $274,600; Year 2 =
$298,000; Year 3 = $303,950; Year 4 = $312,875; and Year 5 =
$374,600. Calculate the Traditional Payback. Assume cash flows are
even throughout the year. Calculate the Net Present Value using the
WACC = 8.28%.
A firm is considering a mining project with the following cash flows (with the final cash...
A firm is considering a mining project with the following cash
flows (with the final cash flow being negative, perhaps due to an
extensive land reclamation in the project’s final year): C0 =
–$280, C1 = $280, C2 = $308, C3 = $364, C4 = $280, and C5 = –$1036.
(a) From among the following multiple-choice answers, calculate
this project’s internal rate(s) of return: 5.070%, 25.225%,
33.333%, 51.909%, 82.425%. (2 pts.) (b) If the required return is
30.000%, should the...
A firm is considering investing in a project with the following cash flows: Year 1 2...
A firm is considering investing in a project with the following
cash flows:
Year
1
2
3
4
5
6
7
8
Cash flow (OMR)
1,000
1,500
2,000
1,750
1,500
1,000
1,000
500
The initial investment is OMR 7,250. The firm has a required
rate of return of 8 per cent.
Calculate:
The payback period;
The discounted payback;
The net present value.
7. A firm is considering a mining project with the following cash flows (with the final...
7. A firm is considering a mining project with the following
cash flows (with the final cash flow being negative, perhaps due to
an extensive land reclamation in the project’s final year):
C0 = –$420, C1 = $420, C2 = $462, C3 = $546, C4 = $420, and C5 =
–$1554. (a) From among the following multiple-choice answers,
calculate this project’s internal rate(s) of return: 5.070%,
25.225%, 33.333%, 51.909%, 82.425%. (2 pts.) (b) If the required
return is 30.000%, should...
FINA Inc. considers a project with the following information: Initial Outlay: 1,500 After-tax cash flows: Year...
FINA Inc. considers a project with the following information:
Initial Outlay: 1,500 After-tax cash flows: Year 1: -$100 Year 2:
$1000 Year 3: $700 FINA’s assets are $500 million, financed through
bank loans, bonds, preferred stocks, and common stocks. The amounts
are as follows: Bank loans: $ 100 million borrowed at 10% Bonds:
$180 million, paying 9% coupon with quarterly payments, and
maturity of 5 years. FINA sold its $1,000 par-value bonds for
$1,070 and had to incur $20 flotation...
FINA Inc. considers a project with the following information: Initial Outlay: 1,500 After-tax cash flows: Year...
FINA Inc. considers a project with the following
information:
Initial Outlay: 1,500
After-tax cash flows:
Year 1: -$100
Year 2: $1000
Year 3: $700
FINA’s assets are $500 million, financed through bank loans,
bonds, preferred stocks, and common stocks. The amounts are as
follows:
Bank loans: $ 100 million borrowed at 10%
Bonds: $180 million, paying 9% coupon with quarterly payments,
and maturity of 5 years. FINA sold its $1,000 par-value bonds for
$1,070 and had to incur $20 flotation cost...
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