Question

In: Finance

Project A has the following cash flows: Year CF: -40,000, 8,000, 14,000, 13,000, 12,000, 11,000, and...

Project A has the following cash flows: Year CF: -40,000, 8,000, 14,000, 13,000, 12,000, 11,000, and 10,000.

Project B has the following cash flows: Year CF: -20,000, 7,000, 13,000, and 12,000.

Assuming that the required rate is 12%, what is the Equivalent Annual Annuity (EAA) for the two projects? Based on the EAA, which project is better?

Expert Solution

	12.0000%
Cash flows	Year	Discounted CF
(40,000.00)	0	-40000.00
8,000.00	1	7142.86
14,000.00	2	11160.71
13,000.00	3	9253.14
12,000.00	4	7626.22
11,000.00	5	6241.70
10,000.00	6	5066.31

PV = 6490.94

FV = 0

rate = 12%

N = 6

use PMT function in Excel

EAA of A = 1,578.76

B:

	12.0000%
Cash flows	Year	Discounted CF
(20,000.00)	0	-20000.00
7,000.00	1	6250.00
13,000.00	2	10363.52
12,000.00	3	8541.36

PV of B =5154.88

FV = 0

rate = 12%

N = 3

use PMT funciton

EAA of B = 2146.23

so B is better

jeff jeffy answered 2 years ago

A project has annual cash flows of $8,000 for the next 10 years and then $12,000...

A project has annual cash flows of $8,000 for the next 10 years and then $12,000 each year for the following 10 years. The IRR of the 20-year project is 11.00%. If the firm’s WACC is 10%, what is the project’s net present value (NPV)? Show work. a. $6,788.44 b. $5,584.49 c. $5,977.45 d. $7,905,50

Shannon Industries is considering a project that has the following cash flows : Year CF...

Shannon Industries is considering a project that has the following cash flows : Year CF 0 -6240 1 1980 2 3750 3 ? 4 1000 The project has a payback of 2.25 years. The firm’s cost of capital is 9.3 percent. What is the project’s net present value (NPV)?

A project has the following cash flows : Year Cash Flows 0 −$12,000 1 5,290 2...

A project has the following cash flows : Year Cash Flows 0 −$12,000 1 5,290 2 7,630 3 5,040 4 −1,580 Assuming the appropriate interest rate is 10 percent, what is the MIRR for this project using the discounting approach? 19.21% 15.23% 13.96% 11.63% 17.77%

A project has the following cash flows: Year Cash Flow 0 $ 40,000 1 – 19,000...

A project has the following cash flows: Year Cash Flow 0 $ 40,000 1 – 19,000 2 – 30,000 What is the IRR for this project? What is the NPV of this project, if the required return is 11 percent? What is the NPV of the project if the required return is 0 percent? What is the NPV of the project if the required return is 22 percent?

Filter Corp. has a project available with the following cash flows: Year Cash Flow 0 −$14,000...

Filter Corp. has a project available with the following cash flows: Year Cash Flow 0 −$14,000 1 6,200 2 7,500 3 4,900 4 4,500 What is the project's IRR?

An capital investment project provides a company with expected cash flows of $10,000; $12,000; $14,000; $16,000,...

An capital investment project provides a company with expected cash flows of $10,000; $12,000; $14,000; $16,000, and $18,000 in years 1-5, respectively. The investment will require an initial expenditure of $45,000 and the company has a weighted average cost of capital of 8.0%. What is the net present value of the project? What is the internal rate of return for the project given? A stock earns a monthly return of 0.85%. What is the equivalent annualized rate of return? The...

SOLO corp. is evaluating a project with the following cash flows: Year Cash Flow 0 -$13,000...

SOLO corp. is evaluating a project with the following cash flows: Year Cash Flow 0 -$13,000 1 $5,800 2 6,500 3 6,200 4 5,100 5 -5,600 The company uses a discount rate of 11 percent and a reinvestment rate of 7 percent on all of its projects. Calculate the MIRR of the project using all three methods using these interest rates. a. MIRR using the discount approach b. MIRR using the reinvestment approach c.MIRR using the combination approach

A project has annual cash flows of $8,000 for the next 10 years and then $8,000...

A project has annual cash flows of $8,000 for the next 10 years and then $8,000 each year for the following 10 years. The IRR of this 20-year project is 8.32%. If the firm's WACC is 8%, what is the project's NPV? Round your answer to the nearest cent. Do not round your intermediate calculations.

A project has an initial cost of $40,000, expected net cash inflows of $12,000 per year...

A project has an initial cost of $40,000, expected net cash inflows of $12,000 per year for 9 years, and a cost of capital of 11%. What is the project's payback period? Round your answer to two decimal places. PLEASE SHOW ME A DETAILED EXPLANATION WITH EXCEL. THANKS!

Solo Corp. is evaluating a project with the following cash flows: Year Cash Flow 0 –$12,000...

Solo Corp. is evaluating a project with the following cash flows: Year Cash Flow 0 –$12,000 1 5,800 2 6,500 3 6,200 4 5,100 5 –4,300 The company uses a disount rate of 11 percent and a reinvestment rate of 8 percent on all of its projects. Calculate the MIRR of the project using all three methods using these interest rates. a. MIRR using the discounting approach. b. MIRR using the reinvestment approach. c. MIRR using the combination approach.