Question

In: Finance

Given the cash-flows in the table, what is the NPV of project A?

1.

Project A

Year

Cash Flow

0

-$107

1

$69

2

$80

3

$120

WACC =

6.19%

Given the cash-flows in the table, what is the NPV of project A?  
State your answer to the nearest penny.
Give just the number with no dollar sign (e.g., 3.26)

If the NPV is negative include the - sign (e.g. -4.28)

2.

Using the information in the table, what is the IRR for Project A?

Cash Flow
Year Project A
0 ($175)
1 $80
2 $75
3 $50
WACC = 5.00%

Solutions

Expert Solution

a.Present value of inflows=cash inflow*Present value of discounting factor(rate%,time period)

=69/1.0619+80/1.0619^2+120/1.0619^3

=236.14

NPV=Present value of inflows-Present value of outflows

=236.14-107

=129.14(Approx)

b.Let irr be x%
At irr,present value of inflows=present value of outflows.

175=80/1.0x+75/1.0x^2+50/1.0x^3

Hence x=irr=9.05%(APPROX)

jeff jeffy answered 2 years ago
Next > < Previous

Related Solutions

Given the following information, estimate the cash flows of this project and then compute the NPV...
Given the following information, estimate the cash flows of this project and then compute the NPV of this project. Estimated Sales: 50,000 units per year for each of the next 3 years Estimate Sale Price: $1,050 per unit Variable Cost: $1,000 per unit Fixed Costs: $1,500,000 per year Initial Investment in Plant and Machinery: $1,500,000 to be depreciated to a salvage value of $0 over the next three years. We sell the machine at $45000 in the market at the...
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          ...
What is NPV, IRR, PI, MIRR of a project with the following cash flows if the...
What is NPV, IRR, PI, MIRR of a project with the following cash flows if the discount rate is 14 percent? Year CF 0 -18,000    1 5000 2 7500 3 8400 4 2100 Also upload your excel files showing your work.
What is the NPV of a project that costs $95,000, provides $36,000 in cash flows annually...
What is the NPV of a project that costs $95,000, provides $36,000 in cash flows annually for 13 years, and requires a $6,000 increase in net working capital? The discount rate is 11%. Round your answer to the nearest dollar.
What is the NPV of a project that costs $100,000, provides $21,000 in cash flows annually...
What is the NPV of a project that costs $100,000, provides $21,000 in cash flows annually for six years, requires a $5,000 increase in net working capital which will be recovered later? The discount rate is 14%. -$13,283 -$21,060 - $18,142 $15,561
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...
What is the NPV of a project that costs $200,000, provides $43,000 in after-tax cash flows...
What is the NPV of a project that costs $200,000, provides $43,000 in after-tax cash flows (excluding the CCA tax shield) annually for six years , requires a $5,000 increase in net working capital, and depreciates the asset at 15 percent declining balance over six years and sold at zero salvage value? The discount rate is 14 percent. The tax rate is 40 percent.(Assume the half-year rule applies and working capital is recovered at the end of the project) Select...
What is the NPV of a project that costs $200,000, provides $43,000 in after-tax cash flows...
What is the NPV of a project that costs $200,000, provides $43,000 in after-tax cash flows (excluding the CCA tax shield) annually for six years , requires a $5,000 increase in net working capital, and depreciates the asset at 15 percent declining balance over six years and sold at zero salvage value? The discount rate is 14 percent. The tax rate is 40 percent.(Assume the half-year rule applies and working capital is recovered at the end of the project)
The cash flows and Net salvage value of Project X is given the following table: Year...
The cash flows and Net salvage value of Project X is given the following table: Year Cash flows Salvage Value 0 -5,800 4,800 1 2,100 3,000 2 3,400 2,200 3 3,600 1,800 4 1,800 0 Based on the Economic Life of this project and the cost of capital is 12%, in what year should you abandoning this Project X? A. Year 3, since NPV in year 3 = $8,429 B. Year 3, since NPV in year 3 = $2,629 C....
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...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT