Question
In: Finance
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
Year 5 $400,000 $600,000 $100,000
Discount rate 10% 13% 18%
Which project should Quark accept?
Solutions
Expert Solution
Project N should be selected because it has highest NPV
jeff jeffy answered 1 year agoRelated Solutions
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 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...
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...
Internal rate of return and modified internal rate of return. Quark Industries has three potential projects,...
Internal rate of return and modified internal rate of
return.
Quark Industries has three potential projects, all with an
initial cost of $1,600,000.
Given the discount rate and the future cash flow of each project
in the following table,
Cash Flow Project M Project N Project O
Year 1 $400,000 $500,000 $900,000
Year 2 $400,000 $500,000
$700,000
Year 3 $400,000 $500,000 $500,000
Year 4 $400,000 $500,000 $300,000
Year 5 $400,000 $500,000 $100,000
Discount rate 9% 14% 17%
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. Independent projects Using a 14% cost of capital, calculate the net present value...
Net present value. Independent projects Using a 14% cost of
capital, calculate the net present value for each of the
independent projects shown in the following table, and indicate
whether each is acceptable.
Project A
Project B
Project C
Project D
Project E
Initial investment
$26,000
$500,000
$170,000
$950,000
$80,000
Year
Cash inflows
1
$4,000
$100,000
$20,000
$230,000
$ 0
2
4,000
120,000
19,000
230,000
0
3
4,000
140,000
18,000
230,000
0
4
4,000
160,000
17,000
230,000
20,000
5
4,000...
Net present value. Independent projects Using a 14% cost of capital, calculate the net present value...
Net present value. Independent projects Using a 14% cost of
capital, calculate the net present value for each of the
independent projects shown in the following table, and indicate
whether each is acceptable.
Project A
Project B
Project C
Project D
Project E
Initial investment
$26,000
$500,000
$170,000
$950,000
$80,000
Year
Cash inflows
1
$4,000
$100,000
$20,000
$230,000
$ 0
2
4,000
120,000
19,000
230,000
0
3
4,000
140,000
18,000
230,000
0
4
4,000
160,000
17,000
230,000
20,000
5
4,000...
What is the net present value of this investment? INITIAL COST
What is the net present value of this
investment?
INITIAL
COST $500,000
PROJECT
LIFE 15
years
SALVAGE
VALUE $
20,000
ANNUAL NET CASH
FLOWS $120,000
DISCOUNT
RATE 15
%
a. $
203,684
b. $
204,142
c. $
205,669
d. $
206,263
e. $
208,721
Donahue Industries Inc. wishes to evaluate three capital investment projects by using the net present value...
Donahue Industries Inc. wishes to evaluate three capital
investment projects by using the net present value method. Relevant
data related to the projects are summarized as follows:
Product Line
Expansion
Distribution
Facilities
Computer
Network
Amount to be invested
$790,052
$535,506
$310,018
Annual net cash flows:
Year 1
413,000
301,000
186,000
Year 2
384,000
271,000
128,000
Year 3
351,000
241,000
93,000
Present Value of $1 at Compound
Interest
Year
6%
10%
12%
15%
20%
1
0.943
0.909
0.893
0.870
0.833
2...
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