Question

A project has the following cash flow.

Year |
Costs |
Benefits |

0 |
$10,000 |
0 |

1 |
$1,000 |
$5,000 |

2 |
$1,000 |
$5,000 |

3 |
$2,000 |
$6,000 |

4 |
$2,0000 |
$3,000 |

Assuming a discount rate of 10%, estimate the following:

a)Net Present Value (NPV)

b)Discounted Benefit-Cost Ratio

c)Net discounted Benefit-Cost Ratio

d)Is the project feasible? Explain your answer

Answer #1

Year | Cost | Benefit | Cash Flows = Benefit - Cost |

0 | 10000 | 0 | -10000 |

1 | 1000 | 5000 | 4000 |

2 | 1000 | 5000 | 4000 |

3 | 2000 | 6000 | 4000 |

4 | 20000 | 3000 | -17000 |

Discount rate = 10%

a)

= $ 4000 / (1.1)^{1} + $
4000 / (1.1)^{2} + $ 4000 / (1.1)^{3} - $ 17000 /
(1.1)^{4} - $ 10000

= - $ 11663

b) Discounted Benefit Cost Value = $
4000 / (1.1)^{1} + $ 4000 / (1.1)^{2} + $ 4000 /
(1.1)^{3} - $ 17000 / (1.1)^{4}

= - $ 1663

= - $ 1663 / $ 10000

= - 0.16

c)

= - $ 11663 / $ 10000

= - 1.16

d) No, the project is not feasible as the NPV is less than 0 and will not add value to shareholders wealth

Preform a benefit/cost analysis on the following
project:
Expected costs: $5,000 today, $5,000 a year from today,
and $5,000 two years from today
Expected revenue: $6,000 five years from today, $7,000
seven years from today, and $8,000 ten years from
today.
Assume a 6% discount rate
The Net Present Value (NPV) of the project
The benefit/cost ratio
Is the project worth undertaking?

A proposed project has the following costs and benefits:
Year
Costs
Benefits
0
2,000
1
1,000
2
1,000
3
1,000
4
2,000
5
2,000
Assuming an interest rate of 10%, the project's simple payback
period is most nearly _________.
A.
2 years
B.
4 years
C.
6 years
D.
5 years
E.
7 years
Using the information in Problem #3 and linear interpolation,
the project's discounted payback period is most nearly
___________.
A.
3.62 years
B.
2.33 years
C.
2.05...

Mega Dynamics is considering a project that has the following
cash flows:
Year
Project Cash Flow
0
?
1
$2,000
2
3,000
3
3,000
4
1,500
The project has an IRR of 17% . The firm's cost of capital is 11
percent. What is the project's net present value (NPV)?

Project P costs $15,000 and is expected to produce benefits
(cash flows) of $4,500 per year for five years. Project Q costs
$37,500 and is expected to produce cash flows of $11,100 per year
for five years. Calculate each project’s (a) net present value
(NPV), (b) internal rate of return (IRR), and (c) mod- ified
internal rate of return (MIRR). The firm’s required rate of return
is 14 percent. Compute the (a) NPV, (b) IRR, (c) MIRR,
and (d) discounted payback...

You are considering a project
with the following set of cash flows:
Cash
flow
0
-5,500
1
2,000
2
3,000
3
1,000
4
2,000
a. What is
the payback period of this project? If the
pre-specified cut off is 3 years,
should this project be accepted?
b. What is
the discounted
payback period of this
project? If the
pre-specified cut off is 3 years, should this project be
accepted? The discount rate is
10%.

Shannon Industries is considering a project which has the
following cash flows:
Year Cash Flow
0 ?
1 $2,000
2 $3,000
3 $3,000
4 $1,500
The project has a payback period of 2 years. The
firm’s cost of capital is 12 percent. What is
the project’s net present value? (round your answer
to the nearest $1.)
a. $ 570
b. $ 730
c. $2,266
d. $2,761
e. $3,766

Assume the following cash flows for Project A: Year 0
=$(10,000); Year 1 = $4,000; Year 2 = $3,500; Year 3 = $1,500; Year
4 = $3,000; and Year 5 = $1,500. The company’s hurdle rate is
9.00%. For Project A, please calculate: 1) the discounted payback
period; 2) the net present value; 3) the internal rate of return;
and 4) the modified internal rate of return.

Anderson Associates is considering two mutually exclusive
projects that have the following cash flows: Project A Project B
Year Cash Flow Cash Flow 0 -$10,000 -$8,000 1 2,000 7,000 2 2,000
3,000 3 6,000 1,000 4 8,000 3,000
At what cost of capital do the two projects have the same net
present value? (That is, what is the crossover rate?) Enter your
answer rounded to two decimal places. Do not enter % in the answer
box. For example, if your...

13) Assume the following cash flows for Project A: Year 0
=$(10,000); Year 1 = $4,000; Year 2 = $3,500; Year 3 = $1,500; Year
4 = $3,000; and Year 5 = $1,500. The company’s hurdle rate is
9.00%. For Project A, please calculate: 1) the discounted payback
period; 2) the net present value; 3) the internal rate of return;
and 4) the modified internal rate of return. (3 points)

A project costs $4,000. You expect the following cash flows from
the project:
Year
Cash Flow
1
$2,000
2
$6,000
3
$4,000
4
$8,000
5
$9,000
If the required rate of return is 14%, what is the NPV of this
project?
Round your answer to two decimal places.

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 46 minutes ago

asked 51 minutes ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 2 hours ago

asked 2 hours ago

asked 2 hours ago

asked 2 hours ago

asked 2 hours ago

asked 3 hours ago

asked 3 hours ago