Question

In: Finance

1.1 A company with a cost of capital of 20% has identified projects with the following...

1.1 A company with a cost of capital of 20% has identified projects with the following cash flows:

Year Project C Project D
0 -N$100 000 -N$30 000
1 40 000 10 000
2 45 000 15 000
3 50 000 20 000
4 55 000 25 000


Required 1:

A. Calculate the NPV and IRR of each project.

Solutions

Expert Solution


Related Solutions

1.1 A company with a cost of capital of 20% has identified projects with the following...
1.1 A company with a cost of capital of 20% has identified projects with the following cash flows: Year Project C Project D 0 -N$100 000 -N$30 000 1 40 000 10 000 2 45 000 15 000 3 50 000 20 000 4 55 000 25 000 Required 1: a. Calculate the payback period of each project. b. Calculate the NPV and IRR of each project. c. Which project would you accept on basis of NPV? On basis of...
A company has the following 2 projects: Projects C0 C1 C2 C3 A -36 20 20...
A company has the following 2 projects: Projects C0 C1 C2 C3 A -36 20 20 20 B -50 25 25 25 Assume that the discount rate is 10%. How much is the difference between the NPV values of these 2 projects (i.e., NPV of Project A minus NPV of Project B)? A) 0.57 B) 1.57 C) 3.67 D) 4.67 E) 13.17 A company uses Internal Rate of Return (IRR) criteria to analyze the following two mutually exclusive projects:      Project...
What is a firm's weighted-average cost of capital if the stock has a beta of 1.1,...
What is a firm's weighted-average cost of capital if the stock has a beta of 1.1, Treasury bills yield 4%, and the market portfolio offers an expected return of 16%? In addition to equity, the firm finances 70% of its assets with debt that has a yield to maturity of 10%. The firm is in the 35% marginal tax bracket.
What is a firm's weighted-average cost of capital if the stock has a beta of 1.1,...
What is a firm's weighted-average cost of capital if the stock has a beta of 1.1, Treasury bills yield 4%, and the market portfolio offers an expected return of 16%? In addition to equity, the firm finances 70% of its assets with debt that has a yield to maturity of 10%. The firm is in the 35% marginal tax bracket.
Without using excel, solve : A company has identified two mutually exclusive cost saving projects. However,...
Without using excel, solve : A company has identified two mutually exclusive cost saving projects. However, the equipment that will be required to realize the cost savings need an upfront investment of $250 million for both the projects. The annual cost savings expected from project 1 is 15% of the annual revenues and from project 2 is 12% of the annual revenues. The equipment used in both the projects have a useful life of 4 years. The firm has decided...
Y-Bar uses IRR to evaluate projects. The company has a cost of capital of 15% They...
Y-Bar uses IRR to evaluate projects. The company has a cost of capital of 15% They are currently comparing two mutually exclusive projects with the following projected cash flows: Project X Project Y Initial Investment -R500 000,00 -R360 000,00 Annual Cash flows Year 1 R25 000,00 R100 000,00 Year 2 R60 000,00 R60 000,00 Year 3 R250 000,00 R250 000,00 Year 4 R250 000,00 R90 000,00 Based on the information above, which statement is most accurate: (a) The company will...
The director of capital budgeting for Giant Inc. has identified two mutually exclusive projects, L and...
The director of capital budgeting for Giant Inc. has identified two mutually exclusive projects, L and S, with the following expected net cash flows: Expected Net Cash Flows Year Project L Project S 0 ($100) ($100) 1 10 70 2 60 50 3 80 20 Both projects have a cost of capital of 12 percent. What is Project S's MIRR? What is Project L's MIRR?
Bumble’s Bees, Inc., has identified the following two mutually exclusive projects: Bumble’s Bees, Inc., has identified...
Bumble’s Bees, Inc., has identified the following two mutually exclusive projects: Bumble’s Bees, Inc., has identified the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 -17,000 -17,000 1 8,000 2,000 2 7,000 5,000 3 5,000 9,000 4 3,000 9,500 Calculate the Internal Rate of Return (IRR) for each of the project using Trial and Error method. Apply the IRR decisionrule, which project should the company accept? If the required return is 11 percent, evaluate the...
Chestnut Tree Farms has identified the following two mutually exclusive projects. The company uses a discount...
Chestnut Tree Farms has identified the following two mutually exclusive projects. The company uses a discount rate of 6%. Year Cash Flow (A) Cash Flow (B) 0 −$ 40,000 −$ 40,000 1 11,300 17,400 2 14,800 14,100 3 13,700 12,900 4 7,900 2,200 What is the IRR of each project? Based on the IRR criterion, which project(s) would you choose? What is the NPV of each project? Based on the NPV method which project(s) would you choose? What is your...
Thomas Company is considering two mutually exclusive projects. The​ firm, which has a cost of capital...
Thomas Company is considering two mutually exclusive projects. The​ firm, which has a cost of capital of 8%, has estimated its cash flows as shown in the following​ table: A is on the left, B is on the right Initial investment 130000 102000 Year Cash inflows 1 20000 55000 2 40000 40000 3 50000 20000 4 60000 15000 5 50000 20000 a.  Calculate the NPV of each​ project, and assess its acceptability. b.   Calculate the IRR for each​ project, and...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT