Question

There are four projects to consider that have the following
net yearly cash flows.

0

1

2

3

4

5

6

P1

-3000

-500

1000

2000

4000

P2

-1000

-1000

500

0

400

500

2000

P3

-4000

2000

-3000

5000

7000

1000

P4

-2000

-4000

-1000

8000

1000

The MARR for this company is 12%.

a) You can select up to two projects to complete. Which
projects would you recommend?

b) Management has imposed a time limit of 4 years for the
projects. What is the implied salvage value for projects 2 and
3?

Answer #1

Years |
P1 |
P2 |
P3 |
P4 |

0 |
-3000 |
-1000 |
-4000 |
-2000 |

1 |
-500 |
-1000 |
2000 |
-4000 |

2 |
1000 |
500 |
-3000 |
-1000 |

3 |
2000 |
0 |
5000 |
8000 |

4 |
4000 |
400 |
7000 |
1000 |

5 |
500 |
1000 |
||

6 |
2000 |
|||

IRR | 24% | 13% | 37% | 12% |

NPV | ? 1,316.40 | ? -1,240.05 | ? 3,401.66 | ? -38.86 |

a) Since the time limit is for 4 years, running NPV and IRR for 4 years cashflow, we find that P1 and P3 can be selected

b) The implied salvage value for projects 2 and 3 are 2000 and 3000 respectively

Suppose you are given the following two projects A and B with
the cash flows below, if the cost of capital is 10%, what is the
Profitability Index (PI) of projects A and B?
Year
Project A
Project B
0
-5000
-6000
1
1500
1500
2
2000
2500
3
3000
4000
4
3500
4000
1.457;1.492
1.457;1.340
1.532;1.528
1.639;1.340
1.622;1.409

Projects A and B have the following cash flows:
year
A
B
0
-5000
-5000
1
2000
5000
2
0
1500
3
3000
1500
4
5000
1500
What is the incremental IRR?
Please write an answer in decimals. For example, 12.34% would be
0.1234.
Also, round your answer to the fourth decimal.

Your company is considering two mutually exclusive projects, X
and Y, whose costs and cash flows are shown below:
Year
X
Y
0
-5000
-5000
1
1000
4500
2
1500
1500
3
2000
1000
4
4000
500
The projects are equally risky, and their cost of capital is
13%. You must make a recommendation, and you must base it on the
modified IRR (MIRR). Calculate the two projects' MIRRs. Do not
round intermediate calculations. Round your answers to two decimal...

Cowboy Corp. is about to expand its operations and they have
several projects with various cash flows available in Excel upload
file. Each project has an 8-year life and the firm has a cost of
capital at 8%. The firm has $15,000 for the expansion and will
invest in multiple projects with that capital constraint.
1. Calculate NPV for each project
2. Find the project combination that maximizes total NPV for
Cowboy Corp. and calculate total capital spending
3. Find...

1. What decisions do you make that you would call rational? What
decisions in your life would you describe as irrational? Why? Be
specific and relate your thinking to what we discussed in terms of
rationality and behavioral economics.
2. Calculate and graph the following short run costs for your
brewery:
Var
Input (Labor)
Fixed
Input (Stills)
Total Product (barrels beer)
FC
VC
TC
MC
AC
AFC
AVC
0
5
0
8000
0
1
5
50
8000
500
2
5...

An investment promises the following cash flow stream:
Year 0
Year 1
Year 2
Year 3
Year 4
Cashflow
1000
2000
3000
5000
The discount rate is 5%. What is the maximum price that you are
willing to pay for this investment now?

Consider two projects with the following cash flows: Project S
is a 4 year project with initial (time 0) cash outflow of 3000 and
time 1 through 4 cash inflows of 1500, 1200, 800 and 300
respectively. Project L is a 4 year project with initial (time 0)
cash outflow of 3000 and time 1 through 4 cash inflows of 400, 900,
1300, and 1500 respectively. Assuming a 5% cost of capital,
determine which project should be chosen if the...

Consider two projects with the following cash flows: Project S
is a 4 year project with initial (time 0) cash outflow of 3000 and
time 1 through 4 cash inflows of 1500, 1200, 800 and 300
respectively. Project L is a 4 year project with initial (time 0)
cash outflow of 3000 and time 1 through 4 cash inflows of 400, 900,
1300, and 1500 respectively. Assuming a 5% cost of capital,
determine which project should be chosen if the...

Fill in the following cost table. For the first few
rows, you can work from left to right. However, as you
get to the last two rows, you will need to use the information from
the right side of the table to work back to the left side. We do
not calculate average costs at a quantity of 0.
Q
TFC
TVC
TC
AFC
AVC
ATC
MC
0
5,000
0
5000
XXXXXX
XXXXXX
XXXXXX
XXXXXX
1
3.000
8000
5000
3000
8000
3,000...

Problem 2. Consider the
following series of cash flows:
Cumulative
Month
Amount
0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
CF (1,000s of $)
$400.00
-700
1200
600
300
-1000
-1200
-400
-300
-1000
1200
400
300
1000
-1200
-400
-300
1000
1200
400
300
-1000
What is the NPV if the MARR yields 15%? Compute
your solution by two (2) methods as follows:
Example.
Compute the...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 12 minutes ago

asked 29 minutes ago

asked 52 minutes ago

asked 59 minutes ago

asked 59 minutes ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago