Question

The Reds considers five new projects. Discount rate is 15%. You need to analyze these projects. 1. Calculate the NPV and IRR of the first project based on the below information: An initial investment cost: $43,500 Salvage value: $2,250 Cash Flows: 1 $15,700 2 $19,400 3 $24,300 4 $8,100 5 $9,400 2. Calculate the NPV and IRR of the second project based on the information: An initial investment cost is $35,700. The project generates $2,500 in the first year, and continue to grow at a constant rate of 10% per year forever. 3. Third project has the same initial investment cost and generates the same cash flows with the second project. However, the third project only generates cash flows for 15 years. Find the NPV of the third project. 4. Use an embedded function in Excel to calculate the NPV of the fourth project if an initial investment cost is $42,500 and it generates the cash flow of $8,000 in the first year. The cash flows have zero growth and the project only generates cash flows for 40 years. 5. The last project has estimated free cash flows (FCF) of $1,000,000, $1,200,000, $800,000, and $1,050,000 over next four years and believes that subsequent cash flows will grow at a constant rate of 3% forever. Calculate the TODAY’s terminal value of cash flows and total value of the project.

Answer 1