Question

In: Finance

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           5,000           5,800           5,800           5,000 -       10,000


3) Calculate the Pay Back for project K and decide if the firm should accept or reject the project. Cost of Capital is 11% and the maximum allowable payback is 4 years

Project K
Time 0 1 2 3 4 5
Cash Flow -       11,000           3,230           4,120           1,530           3,500              990


4) Calculate the Discounted Pay Back for project S and decide if the firm should accept or reject the project. Cost of Capital is 10% and the maximum allowable discounted payback is 3 years

Project S
Time 0 1 2 3 4 5
Cash Flow -       11,000           3,350           4,120           2,280           3,500           1,000



5) Calculate the IRR for project T and decide if the firm should accept or reject the project. Appropriate Cost of Capital is 8%

Project T
Time 0 1 2 3 4 5
Cash Flow -       11,000           3,350           4,120           1,530           3,500           1,000


6) Calculate the MIRR for project I and decide if the firm should accept or reject the project. Appropriate Cost of Capital is 12%. Reinvestment rate is 5%

Project I
Time 0 1 2 3 4
Cash Flow -       11,000           5,330           4,120           1,530           2,030


7) Calculate the PI for project D and decide if the firm should accept or reject the project. Appropriate Cost of Capital is 8%

Project D
Time 0 1 2 3 4 5
Cash Flow -         1,000              330              485              620              289              100


Solutions

Expert Solution

0 1 2 3 4 5 NPV
A -990 350 480 500 630 120 $730.68 Accept
L -8,600 5,000 5,800 5,800 5,000 -10,000 $2,636.64 Accept

NPV can be calculated using NPV function in excel or calculator or manually using the given discount rates.

If NPV > 0, project should be accepted.

Payback
K -11,000 3,230 4,120 1,530 3,500 990 3.61 Accept

Payback period is the no. of years it takes to recover the investment. As it is less than 4 years, accept this project.

0 1 2 3 4 5 D.Payback
S -11,000 3,350 4,120 2,280 3,500 1,000             
DCF S -11,000 3,045 3,405 1,713 2,391 621 4.72 Reject

Discounted payback is payback using discounted cash flows (DCF). As it is above 4 years, reject the project.

IRR
T -11,000 3,350 4,120 1,530 3,500 1,000 8.40% Accept

IRR can be calculated using IRR function in excel or calculator. As IRR > 8%, accept the project.

MIRR
I -11,000 5,330 4,120 1,530 2,030 6.87% Reject

MIRR can be calculated using MIRR function in excel or manually using formula

PI
D -1,000 330 485 620 289 100 2.49 Accept

PI = 1 + NPV / CF0

As PI > 1, Accept the project


Related Solutions

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,...
NPV mathematically will give the correct accept-or-reject decision regardless of Whether the project experiences non-normal cash...
NPV mathematically will give the correct accept-or-reject decision regardless of Whether the project experiences non-normal cash flows or if differences in project size or timing of cash flows exist in our case." Would the IRR provides the correct accept -or-reject decision as the NPV ? If you cannot eliminate the systematic risk, how can you reduce it if you hold a portfolio of several stocks?
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...
Calculate the NPV of a 20-year project with a cost of $300,000 and annual cash flows...
Calculate the NPV of a 20-year project with a cost of $300,000 and annual cash flows of $25,000 in years 1-10 and $50,000 in years 11-20. The company's required rate of return is 10%
Calculate the NPV for a 3-year project with the following cash flows and a required return...
Calculate the NPV for a 3-year project with the following cash flows and a required return of 15%: CF0 = -$800,000 ATCF1 = $160,000 ATCF2 = $160,000 ATCF3 = $160,000 ATER = $600,000 Calculate the IRR for a 2-year project with the following cash flows and a required return of 12%: CFO = -$375,000 ATCF1 = $27,500 ATCF2 = -$134,800 ATER = $596,000 ATER = After-Tax Equity Reversion ATCF = After-Tac Cash Flow Please show me how you answer the...
You are trying to decide whether to accept or reject a project. The project will generate...
You are trying to decide whether to accept or reject a project. The project will generate a cash flow of $15,000 in year one; $25,000 in year two; $20,000 in year three; and $4,000 in year four. The project costs $40,000 initially. The firm has a weighted average cost of capital of 8%. Your firm generally accepts projects that payback in three years or less. What is the discounted payback of the project? Should you accept or reject the project?
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...
7- Calculate net present value (NPV) for the above investment decision. Would you accept or reject this investment decision? Why?
  Motorola Mobility LLC is a company that develops mobile devices. Headquartered in Chicago, Illinois, United States, the company was formed on January 4, 2011 by the split of Motorola Inc. into two separate companies; Motorola Mobility took on the company's consumer-oriented product lines, including its mobile phone business and its cable modems and set-top boxes for digital cable and satellite television services, while Motorola Solutions retained the company's enterprise-oriented product lines. Early 2012, Google decided to purchase Motorola mobility...
These are the cash flows for two projects. Calculate the NPV and IRR for both. Then...
These are the cash flows for two projects. Calculate the NPV and IRR for both. Then select the best project according to the NPV measure. Use a WACC of 10% for both projects. The investments are 7 for project 1, and 8 for project 2. Cash flows for project 1 year 1 2 3 4 cash 4 6 2 4 Cash flows for project 2 year 1 2 3 4 cash 3 2 7 4 Calculate the NPV for project...
As a general rule, if using the Profitability Index as a guide to accept/reject a project,...
As a general rule, if using the Profitability Index as a guide to accept/reject a project, you should accept the project if the Profitability Index is             a equal to 0             b greater than 0             c greater than 1             d greater than the IRR
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT