Question
In: Finance
Calculate the NPV for each project and determine which project should be accepted. Project A Project...
Calculate the NPV for each project and determine which project should be accepted.
| Project A | Project B | Project C | Project D | |
| Inital Outlay | (105,000.000) | (99,000.00) | (110,000.00) | (85,000.00) |
| Inflow year 1 | 53,000.00 | 51,000.00 | 25,000.00 | 45,000.00 |
| Inflow year 2 | 50,000.00 | 47,000.00 | 55,000.00 | 50,000.00 |
| Inflow year 3 | 48,000.00 | 41,000.00 | 15,000.00 | 30,000.00 |
| Inflow year 4 | 30,000.00 | 52,000.00 | 21,000.00 | 62,000.00 |
| Inflow year 5 | 35,000.00 | 40,000.00 | 35,000.00 | 68,000.00 |
| Rate | 7% | 10% | 13% | 18% |
Your company is considering three independent projects. Given the following cash flow information, calculate the payback period for each. If your company requires a three-year payback before an investment can be accepted, which project(s) would be accepted?
| Project D | Project E | Project F | |
| Cost | 205,000.00 | 179,000.00 | 110,000.00 |
| Inflow year 1 | 53,000.00 | 51,000.00 | 25,000.00 |
| Inflow year 2 | 50,000.00 | 87,000.00 | 55,000.00 |
| Inflow year 3 | 48,000.00 | 41,000.00 | 21,000.00 |
| Inflow year 4 | 30,000.00 | 52,000.00 | 9,000.00 |
| Inflow year 5 | 24,000.00 | 40,000.00 | 35,000.00 |
Using market value and book value (separately), find the adjusted WACC, using 30% tax rate.
| Component | Balance Sheet Value | Market Value | Cost of Capital |
| Debt | 5,000,000.00 | 6,850,000.00 | 8% |
| Preferred Stock | 4,000,000.00 | 2,200,00.00 | 10% |
| Common Stock | 2,000,000.00 | 5,600,000.00 | 13% |
Solutions
jeff jeffy answered 2 years agoRelated Solutions
Calculate the NPV for each project and determine which project should be accepted. Project A Project...
Calculate the NPV for each project and determine which project
should be accepted. Project A Project B Project C Project D Initial
Outlay (105,000.00) (99,000.00) (110,000.00) (85,000.00) Inflow
year 1 53,000.00 51,000.00 25,000.00 45,000.00 Inflow year 2
50,000.00 47,000.00 55,000.00 50,000.00 Inflow year 3 48,000.00
41,000.00 15,000.00 30,000.00 Inflow year 4 30,000.00 52,000.00
21,000.00 62,000.00 Inflow year 5 35,000.00 40,000.00 35,000.00
68,000.00 Rate 7% 10% 13% 18% NPV = $75,228.32 $77,364.07
-$2,531.00 $69,006.08 Answer: Project B How to show work...
Calculate the following problems using Microsoft® Excel®: Calculate the NPV for each project and determine which project should...
Calculate the following problems using
Microsoft® Excel®:
Calculate the NPV for each project and determine which
project should be accepted.
Project A Project B Project C Project D
Inital Outlay (105,000.000) (99,000.00) (110,000.00)
(85,000.00)
Inflow year 1 53,000.00 51,000.00 25,000.00 45,000.00
Inflow year 2 50,000.00 47,000.00 55,000.00 50,000.00
Inflow year 3 48,000.00 41,000.00 15,000.00 30,000.00
Inflow year 4 30,000.00 52,000.00 21,000.00 62,000.00
Inflow year 5 35,000.00 40,000.00 35,000.00 68,000.00
Rate 7% 10% 13% 18%
Your company is considering three independent
projects. Given...
g. Determine the PI for each of these projects. Should either project be accepted? PROJECT A...
g. Determine the PI for each of these projects. Should either
project be accepted?
PROJECT A
PROJECT B
Initial outlay
-110,000
-110,000
Inflow year 1
10,000
40,000
Inflow year 2
30,000
40,000
Inflow year 3
40,000
40,000
Inflow year 4
60,000
40,000
Inflow year 5
80,000
40,000
g. What is the PI for project A?
nothing
(Round to three decimal places.)
Caledonia should
accept
project A because its PI is
greater than or equal to
1.00. (Select from the drop-down...
Calculate the NPV for the following project. The company wants to determine whether it should expand...
Calculate the NPV for the following project. The company wants
to determine whether it should expand and purchase a new piece of
equipment (20% CCA Rate). The equipment will cost $100,000, have a
useful life of 20 years, and have a projected salvage value of
$5,000. By purchasing the equipment, the company can increase its
net revenues by $7,500 per year. Using a discount rate of 10% and a
tax rate of 30%, should the company purchase the equipment?
Nokia has two Projects. Project A and Project B. Which project should be accepted under each...
Nokia has two Projects. Project A and Project B. Which project
should be accepted under each measurement.
Project A
Project B
NPV ($)
2578
3842
IRR ($)
12
14
MIRR (%)
10
11
PI
1.2
1.5
Payback Period (years)
3
3.8
Discounted Payback Pd (Years)
4.2
4.8
Nokia's cost of capital is 8%. Its critical payback period is 2
years and the critical discount payback period is 3 years
NPV - (Project A be accepted, Project B be accepted, or...
1. Calculate the net present value (NPV) for both projects, anddetermine which project should be...
Use the following information to answer the next three questions. Consider the cash flows from two mutually exclusive projects: YearProject AProject B0-$420,000-$420,0001$140,000$400,0002$230,000$110,0003$331,000$140,000The appropriate discount rate is 8.5%.1. Calculate the net present value (NPV) for both projects, and
determine which project should be accepted based on NPV. Round both
NPVs to the nearest dollar.2. Calculate the internal rate of return (IRR) for both
projects, and determine which project should be accepted based on
IRR.3. Calculate the net present value (NPV) for both projects...
1. NPV According to the text, the NPV rule states that "An investment should be accepted...
1. NPV According to the text, the NPV rule states that "An
investment should be accepted if the NPV is positive and rejected
if it is negative." What does an NPV of zero mean? If you were a
decision-maker faced with a project with a zero NPV (or very close
to zero) what would you do? Why?
2. FORECASTING ERROR (RISK) What is a "forecasting error"? Why
is it important to the analysis of capital expenditure
projects?
For each project, calculate the NPV, IRR, profitability index (PI) and the payback period. For each...
For each project, calculate the NPV, IRR, profitability index
(PI) and the payback period. For each capital budgeting decision
tool, indicate if the project should be accepted or rejected,
assuming that each project is independent of the others. Important
Note: The venture capital folks have a firm maximum payback
period of four years. Risk free rate = 1.10%, MRP = 9.5%,
Required return = 14.40% Yes excel is fine
Expected cash flows for the four potential projects that Avalon
is...
. For each project, calculate the NPV, IRR, profitability index (PI) and the payback period. For...
. For each project, calculate the NPV, IRR, profitability index
(PI) and the payback period. For each capital budgeting decision
tool, indicate if the project should be accepted or rejected,
assuming that each project is independent of the others. Important
Note: The venture capital folks have a firm maximum payback
period of four
years.
Project A= Required rate of Return=
16.30%
Project B= R= 12.50%
Project C= R= 15.35%
Project D= R= 17.25%
Expected cash flows for the four...
Calculate the IRR, the NPV, and the MIRR for each project, and indicate the correct accept/reject decision for each.
11. Problem 10-08 (NPVs, IRRs, and MIRRs for
Independent Projects)NPVs, IRRs, and MIRRs for Independent ProjectsEdelman Engineering is considering including two pieces of equipment, a truck and an overhead pulley system, in this year's capital budget. The projects are independent. The cash outlay for the truck is $18,000, and that for the pulley system is $22,000. The firm's cost of capital is 14%. After-tax cash flows, including depreciation, are as follows:YearTruckPulley1$5,100$7,50025,1007,50035,1007,50045,1007,50055,1007,500Calculate the IRR, the NPV, and the MIRR for each project,...
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