Question

In: Finance

Sylvan Forests Ltd is analysing a new paper product with the following after-tax cash flows: YEAR...

Sylvan Forests Ltd is analysing a new paper product with the following after-tax cash flows:

YEAR

CASH FLOW

0

-200,000

1

60,000

2

64,000

3

64,000

4

68,000

5

68,000

Sylvan Forests require a return of 15% on projects with this level of risk.

What is the payback period for this project?

What is the net present value of this project?

Sylvan Forests’ CFO says he believes the IRR of this project is either 14.03% or 18.12%. Without doing any computations, which is more likely to be correct and why? (1 mark)

Prove your answer to part c – show all computations (or calculator inputs).

Should Sylvan Forests Ltd proceed with this project? Clearly state the criteria you used to make this decision.

Solutions

Expert Solution


jeff jeffy answered 11 months ago
Next > < Previous

Related Solutions

Question 6 Sylvan Forests Ltd is analysing a new paper product with the following after-tax cash...
Question 6 Sylvan Forests Ltd is analysing a new paper product with the following after-tax cash flows: YEAR CASH FLOW 0 -200,000 1 60,000 2 64,000 3 64,000 4 68,000 5 68,000 Sylvan Forests require a return of 15% on projects with this level of risk. What is the payback period for this project? What is the net present value of this project? Sylvan Forests’ CFO says he believes the IRR of this project is either 14.03% or 18.12%. Without...
A project has the following total (or net) after-tax cash flows.                ____________________________________________________         Year&nbs
A project has the following total (or net) after-tax cash flows.                ____________________________________________________         Year             Total (or net) after-tax cash flow                ____________________________________________________                   1 $1,000,000 2 1,500,000 3 2,000,000 4 2,500,000                   _______________________________________________________ The required rate of return on the project is 15 percent. The initial investment (or initial cost or initial outlay) of the project is $4,000,000. a) Find the (regular) payback period of the project. b) Compute the discounted payback period of the project. c) Find...
Each of the following scenarios is independent. Assume that all cash flows are after-tax cash flows....
Each of the following scenarios is independent. Assume that all cash flows are after-tax cash flows. Campbell Manufacturing is considering the purchase of a new welding system. The cash benefits will be $480,000 per year. The system costs $2,050,000 and will last 10 years. Evee Cardenas is interested in investing in a women's specialty shop. The cost of the investment is $330,000. She estimates that the return from owning her own shop will be $45,000 per year. She estimates that...
A capital budget project is estimated to have the following after-tax cash flows, by year: 0...
A capital budget project is estimated to have the following after-tax cash flows, by year: 0 1 2 3 4 -$35,000 $13,000 $15,000 $17,000 $19,000 Use the information in the table above for the following questions 11a. through 11f. The company utilizes a discount rate of 9% to evaluate capital projects. You may have rounding errors in your calculations so choose the closest answer. 1. Find NPV, IRR, MIRR, and PI for the project shown above 2. Find Payback and...
You are analysing a project and have prepared the following data: Year         Cash flows     0             -$275,000 &nbs
You are analysing a project and have prepared the following data: Year         Cash flows     0             -$275,000       1                 $ 50,000      2                $ 75,000      3                $ 95,000       4                 $ 15,000 Required payback period 3 years    Required rate of return 5% a) Determine the project’s Profitability Index, Internal Rate of Return, NPV and Discounted Payback Period                                                                                                                                                    [40 Marks] b) Decide whether accept the project based on the above investment decision criteria?          [5 Marks] [Total: 45 Marks] Please provide full steps (No excel...
what is the net present value of a project with the following after tax cash flows...
what is the net present value of a project with the following after tax cash flows using a discount rate of 10% year 0 45,000 year 1 14,000 year 2 14,000 year 3 10,000 year 4 10,000 year 5 8,000 would you accept the project? ehat is payback period? what is the profitbility index?
Payback and ARR Each of the following scenarios is independent. All cash flows are after-tax cash...
Payback and ARR Each of the following scenarios is independent. All cash flows are after-tax cash flows. Required: 1. Brad Blaylock has purchased a tractor for $86,250. He expects to receive a net cash flow of $29,750 per year from the investment. What is the payback period for Jim? Round your answer to two decimal places. years 2. Bertha Lafferty invested $377,500 in a laundromat. The facility has a 10-year life expectancy with no expected salvage value. The laundromat will...
Payback and ARR Each of the following scenarios is independent. All cash flows are after-tax cash...
Payback and ARR Each of the following scenarios is independent. All cash flows are after-tax cash flows. Required: 1. Brad Blaylock has purchased a tractor for $90,000. He expects to receive a net cash flow of $32,500 per year from the investment. What is the payback period for Jim? Round your answer to two decimal places. years 2. Bertha Lafferty invested $382,500 in a laundromat. The facility has a 10-year life expectancy with no expected salvage value. The laundromat will...
FINA Inc. considers a project with the following information: Initial Outlay: 1,500 After-tax cash flows: Year...
FINA Inc. considers a project with the following information: Initial Outlay: 1,500 After-tax cash flows: Year 1: -$100 Year 2: $1000 Year 3: $700 FINA’s assets are $500 million, financed through bank loans, bonds, preferred stocks, and common stocks. The amounts are as follows: Bank loans: $ 100 million borrowed at 10% Bonds: $180 million, paying 9% coupon with quarterly payments, and maturity of 5 years. FINA sold its $1,000 par-value bonds for $1,070 and had to incur $20 flotation...
FINA Inc. considers a project with the following information: Initial Outlay: 1,500 After-tax cash flows: Year...
FINA Inc. considers a project with the following information: Initial Outlay: 1,500 After-tax cash flows: Year 1: -$100 Year 2:  $1000 Year 3: $700 FINA’s assets are $500 million, financed through bank loans, bonds, preferred stocks, and common stocks. The amounts are as follows: Bank loans: $ 100 million borrowed at 10% Bonds: $180 million, paying 9% coupon with quarterly payments, and maturity of 5 years. FINA sold its $1,000 par-value bonds for $1,070 and had to incur $20 flotation cost...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT