Question
In: Finance
Your division is considering two investment projects, each of which requires an up-front expenditure of $23...
Your division is considering two investment projects, each of which requires an up-front expenditure of $23 million. You estimate that the investments will produce the following net cash flows: Year
Year Project A Project B
1 $ 6,000,000 $20,000,000
2 10,000,000 10,000,000
3 20,000,000 8,000,000
What are the two projects' net present values, assuming the cost of capital is 5%? Round your answers to the nearest dollar.
Project A $ Project B $
What are the two projects' net present values, assuming the cost of capital is 10%? Round your answers to the nearest dollar.
Project A $ Project B $
What are the two projects' net present values, assuming the cost of capital is 15%? Round your answers to the nearest dollar.
Project A $ Project B $
What are the two projects' IRRs at these same costs of capital? Round your answers to two decimal places.
Project A % Project B %
Solutions
Expert Solution
| A) | |||||
| Year | Project A | Project B | PV @ 5% | PV Project A | PV Project B |
| 0 | -$23,000,000.00 | -$23,000,000.00 | 1.0000 | -$23,000,000.00 | -$23,000,000.00 |
| 1 | $6,000,000.00 | $20,000,000.00 | 0.9524 | $5,714,285.71 | $19,047,619.05 |
| 2 | $10,000,000.00 | $10,000,000.00 | 0.9070 | $9,070,294.78 | $9,070,294.78 |
| 3 | $20,000,000.00 | $8,000,000.00 | 0.8638 | $17,276,751.97 | $6,910,700.79 |
| IRR | NPV | $9,061,332 | $12,028,615 | ||
| B) | |||||
| Year | Project A | Project B | PV @ 10% | PV Project A | PV Project B |
| 0 | -$23,000,000.00 | -$23,000,000.00 | 1.0000 | -$23,000,000.00 | -$23,000,000.00 |
| 1 | $6,000,000.00 | $20,000,000.00 | 0.9091 | $5,454,545.45 | $18,181,818.18 |
| 2 | $10,000,000.00 | $10,000,000.00 | 0.8264 | $8,264,462.81 | $8,264,462.81 |
| 3 | $20,000,000.00 | $8,000,000.00 | 0.7513 | $15,026,296.02 | $6,010,518.41 |
| IRR | NPV | $5,745,304 | $9,456,799 | ||
| C) | |||||
| Year | Project A | Project B | PV @ 15% | PV Project A | PV Project B |
| 0 | -$23,000,000.00 | -$23,000,000.00 | 1.0000 | -$23,000,000.00 | -$23,000,000.00 |
| 1 | $6,000,000.00 | $20,000,000.00 | 0.8696 | $5,217,391.30 | $17,391,304.35 |
| 2 | $10,000,000.00 | $10,000,000.00 | 0.7561 | $7,561,436.67 | $7,561,436.67 |
| 3 | $20,000,000.00 | $8,000,000.00 | 0.6575 | $13,150,324.65 | $5,260,129.86 |
| IRR | NPV | $2,929,153 | $7,212,871 | ||
| D) | |||||
| Year | Project A | Project B | |||
| 0 | -$23,000,000.00 | -$23,000,000.00 | |||
| 1 | $6,000,000.00 | $20,000,000.00 | |||
| 2 | $10,000,000.00 | $10,000,000.00 | |||
| 3 | $20,000,000.00 | $8,000,000.00 | |||
| IRR | 21.18% | 37.15% | |||
jeff jeffy answered 1 year agoRelated Solutions
our division is considering two investment projects, each of which requires an up-front expenditure of $23...
our division is considering two investment projects, each of
which requires an up-front expenditure of $23 million. You estimate
that the investments will produce the following net cash flows:
Year
Project A
Project B
1
$ 4,000,000
$20,000,000
2
10,000,000
10,000,000
3
20,000,000
8,000,000
What are the two projects' net present values, assuming the cost
of capital is 5%? Round your answers to the nearest dollar.
Project A $
Project B $
What are the two projects' net present values, assuming...
Your division is considering two investment projects, each of which requires an up-front expenditure of $17...
Your division is considering two investment projects, each of
which requires an up-front expenditure of $17 million. You estimate
that the investments will produce the following net cash flows:
Year
Project A
Project B
1
$ 5,000,000
$20,000,000
2
10,000,000
10,000,000
3
20,000,000
6,000,000
What are the two projects' net present values, assuming the cost
of capital is 5%, 10% and 15%?
What are the two projects' IRRs at these same costs of
capital?
Your division is considering two investment projects, each of which requires an up-front expenditure of $17...
Your division is considering two investment projects, each of
which requires an up-front expenditure of $17 million. You estimate
that the investments will produce the following net cash flows:
Year
Project A
Project B
1
$ 5,000,000
$20,000,000
2
10,000,000
10,000,000
3
20,000,000
6,000,000
What are the two projects' net present values, assuming the cost
of capital is 5%? Do not round intermediate calculations. Round
your answers to the nearest dollar.
Project A: $
Project B: $
What are the two...
NPV Your division is considering two investment projects, each of which requires an up-front expenditure of...
NPV
Your division is considering two investment projects, each of
which requires an up-front expenditure of $15 million. You estimate
that the investments will produce the following net cash flows:
Year
Project A
Project B
1
$ 5,000,000
$20,000,000
2
10,000,000
10,000,000
3
20,000,000
6,000,000
What are the two projects' net present values, assuming the cost
of capital is 5%? Do not round intermediate calculations. Round
your answers to the nearest dollar.
Project A: $
Project B: $
What are the...
Your division is considering two investment projects, each of which requires an up-front expenditure of $24...
Your division is considering two investment projects, each of
which requires an up-front expenditure of $24 million. You estimate
that the cost of capital is 11% and that the investments will
produce the following after-tax cash flows (in millions of
dollars):
Year Project A Project B
1 5 20
2 10 10
3 15 8
4 20 6
What is the regular payback period for each of the projects?
Round your answers to two decimal places.
Project A
Project B...
Your division is considering two investment projects, each of which requires an up-front expenditure of $20...
Your division is considering two investment projects, each of
which requires an up-front expenditure of $20 million. You estimate
that the investments will produce the following net cash flows:
Year Project A Project B
1 $4,500,000 $20,000,000
2 10,000,000 10,000,000
3 20.000.000 6,500,000
What are the two project’s NPVs assuming the cost of capital is
3%, 12%, 17%?
What are the two projects’ IRRs at those same costs of
capital?
NPV Your division is considering two investment projects, each of which requires an up-front expenditure of...
NPV
Your division is considering two investment projects, each of
which requires an up-front expenditure of $17 million. You estimate
that the investments will produce the following net cash flows:
Year
Project A
Project B
1
$ 4,000,000
$20,000,000
2
10,000,000
10,000,000
3
20,000,000
6,000,000
What are the two projects' net present values, assuming the cost
of capital is 5%? Do not round intermediate calculations. Round
your answers to the nearest dollar.
Project A: $
Project B: $
What are the...
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Your division is considering two facility investment projects,
each of which requires an up-front expenditure of $15 million. You
estimate that the investments will produce the following net cash
flows: Year Project A Project B 1 $5,000,000 $20,000,000 2
$10,000,000 $10,000,000 3 $20,000,000 $6,000,000 What are the
project's net present values, assuming the cost of the capital is
a)10% b)5% )15%? What does this analysis tell you about the
projects?
NPV Your division is considering two investment projects, each of which requires an up-front expenditure of...
NPV Your division is considering two investment projects, each
of which requires an up-front expenditure of $23 million. You
estimate that the investments will produce the following net cash
flows: Year Project A Project B 1 $ 5,000,000 $20,000,000 2
10,000,000 10,000,000 3 20,000,000 6,000,000
What are the two projects' net present values, assuming the cost
of capital is 5%? Round your answers to the nearest dollar.
Project A $ Project B $
What are the two projects' net present...
Your division is considering two investment projects, each of which requires an up-front expenditure of $14...
Your division is considering two investment projects, each of
which requires an up-front expenditure of $14 million. You estimate
that the investments will produce the following net cash flows:
Year
Year
$5,000,000
$20,000,000
1
10,000,000
10,000,000
2
20.000.000
6,000,000
3
a. What are the two project’s NPVs assuming the cost of capital
is 4%, 11%, 16%?
b. What are the two projects’ IRRs at those same costs of
capital?
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