Question
In: Finance
Net present value. Quark Industries has a project with the following projected cash flows: Initial cost:...
Net present value. Quark Industries has a project with the following projected cash flows: Initial cost: $210,000 Cash flow year one: $25,000 Cash flow year two: $72,000 Cash flow year three: $146,000 Cash flow year four: $146,000 a. Using a discount rate of 11% for this project and the NPV model, determine whether the company should accept or reject this project. b. Should the company accept or reject it using a discount rate of 13%? c. Should the company accept or reject it using a discount rate of 22%?
Solutions
Expert Solution
a.Present value of inflows=cash inflow*Present value of discounting factor(rate%,time period)
=25000/1.11+72000/1.11^2+146000/1.11^3+146000/1.11^4
=$283,888.00
NPV=Present value of inflows-Present value of outflows
=$283,888.00-$210,000
=$73,888.00(Approx).
Hence since NPV is positive;project must be accepted.
b.Present value of inflows=cash inflow*Present value of discounting factor(rate%,time period)
=25000/1.13+72000/1.13^2+146000/1.13^3+146000/1.13^4
=$269240.31
NPV=Present value of inflows-Present value of outflows
=$269240.31-$210,000
=$59240.31(Approx).
Hence since NPV is positive;project must be accepted.
c.Present value of inflows=cash inflow*Present value of discounting factor(rate%,time period)
=25000/1.22+72000/1.22^2+146000/1.22^3+146000/1.22^4
=$215,173.37
NPV=Present value of inflows-Present value of outflows
=$215,173.37-$210,000
=$5,173.37(Approx).
Hence since NPV is positive;project must be accepted.
jeff jeffy answered 1 year agoRelated Solutions
Net present value. Quark Industries has a project with the following projected cash flows: Initial cost:...
Net present value. Quark Industries has a
project with the following projected cash flows:
Initial cost: $270,000
Cash flow year one: $24,000
Cash flow year two: $79,000
Cash flow year three: $155,000
Cash flow year four: $155,000
a. Using a discount rate of 10% for this
project and the NPV model, determine whether the company should
accept or reject this project.
b. Should the company accept or reject it using
a discount rate of 13%?
c. Should the company accept...
Net present value. Lepton Industries has a project with the following projected cash flows: Initial cost:...
Net present value. Lepton Industries has a
project with the following projected cash flows:
Initial cost: $460,000
Cash flow year one: $132,000
Cash flow year two: $200,000
Cash flow year three: $191,000
Cash flow year four: $132,000
a. Using a discount rate of 11% for this
project and the NPV model, determine whether the company should
accept or reject this project.
b. Should the company accept or reject it using
a discount rate of 13%?
c. Should the company accept...
Net present value. Quark Industries has three potential projects, all with an initial cost of $1,800,000....
Net present value. Quark Industries has three potential
projects, all with an initial cost of $1,800,000. The capital
budget for the year will allow Quark to accept only one of the
three projects. Given the discount rate and the future cash flow of
each project, determine which project Quark should accept.
Cash Flow Project M Project
N Project O
Year 1 $500,000 $600,000 $1,000,000
Year 2 $500,000 $600,000 $800,000
Year 3 $500,000 $600,000 $600,000
Year 4 $500,000 $600,000 $400,000
Year...
Net present value. Quark Industries has three potential projects, all with an initial cost of $1...
Net present
value.
Quark Industries has three potential projects, all with an
initial cost of
$1 comma 900 comma 0001,900,000.
The capital budget for the year will allow Quark to accept only
one of the three projects. Given the discount rate and the future
cash flow of each project, determine which project Quark should
accept.
Cash Flow
Project M
Project N
Project O
Year 1
$500 comma 000500,000
$600 comma 000600,000
$1 comma 000 comma 0001,000,000
Year 2
$500...
Net present value. Quark Industries has three potential projects, all with an initial cost of $1,700,000....
Net present value. Quark Industries has three potential
projects, all with an initial cost of $1,700,000. The capital
budget for the year will allow Quark to accept only one of the
three projects. Given the discount rate and the future cash flow of
each project, determine which project Quark should accept.
Cash Flow Project M Project N Project O
Year 1 $400,000 $600,000 $900,000
Year 2 $400,000 $600,000 $700,000
Year 3 $400,000 $600,000 $500,000
Year 4 $400,000 $600,000 $300,000 ...
Lepton Industries has a project with the following projected cash flows: Initial Cost, Year 0: $468,000...
Lepton Industries has a project with the following projected
cash flows: Initial Cost, Year 0: $468,000 Cash flow year one:
$135,000 Cash flow year two: $240,000 Cash flow year three:
$185,000 Cash flow year four: $135,000 Plot the NPV profile of this
project in Excel. Start with discount rate equal to zero and
increase the discount rate by 2% increments until discount rate
equal to 30%. For what discount rates would Lepton accept this
project? For what discount rates would...
A project requires an initial cost of $225,000; has a present value of operating cash flows...
A project requires an initial cost of $225,000; has a present
value of operating cash flows over its ten-year life of $310,000;
and has a book value at the end of 10 years of $120,000. Current
assets of $20,000, and current liabilities of $4,000 will be needed
for the project to begin. Calculate the terminal value and NPV
using its book value after 10 years, assuming a 15 percent discount
rate.
Project A has an initial cost of $211,400 and projected cash flows of $46,200, $64,900, and...
Project A has an initial cost of $211,400 and projected cash
flows of $46,200, $64,900, and $135,800 for Years 1 to 3,
respectively. Project B has an initial cost of $187,900 and
projected cash flows of $43,200, $59,700, and $125,600 for Years 1
to 3, respectively. What is the incremental IRRA–B of
these two mutually exclusive projects?
What is the net present value of a project that has an initial cash outflow of...
What is the net present value of a project that has an initial
cash outflow of $-13,000, at time 0, and the following cash flows
for years 1-4? The required return is 10.0%. DO NOT USE DOLLAR
SIGNS OR COMMAS IN YOUR ANSWER. ENTER YOUR ANSWER TO THE NEAREST
DOLLAR (e.g. 1250). Year Cash Flows 1 $3,950 2 $3,750 3 $5,900 4
$6,400
Project Q has an initial cost of $257,412 and projected cash flows of $123,300 in Year...
Project Q has an initial cost of $257,412 and projected cash
flows of $123,300 in Year 1 and $180,300 in Year 2. Project R has
an initial cost of $349,000 and projected cash flows of $184,500 in
Year 1 and $230,600 in Year 2. The discount rate is 12.2 percent
and the projects are mutually exclusive. Which project(s), if any,
should be accepted based on the net present value rule?
A.
Accept both Projects.
B.
Accept Project R and reject...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- Describe System Development Life Cycle (SDLC) and how it is used.
- What symbolism do you find in the play,Oedipus?
- • Using the Scanner class to obtain input from the user. • Using printf to output...
- In each of the following situations, develop a tentative plan for the client. List the various...
- MARGI sells different types of wine. Customers place orders to the most popular “Summer Wine” at...
- Java. If possible please put explanations for each line of code. Write a test program that...
- . Use the following information to calculate your company's expected return State Probability Return Boom 20%...
ADVERTISEMENT