Question

**11-1** If Company XYZ plans to invest in a
project with initial capital outlay $52,125, annual net cash inflow
$12,000 for 8 years, and discount rate 12%, what is the Company
XYZ’s NPA?

**11-2** For the Company XYZ’s same project as in
11-1, what is the IRR for the project?

**There are two projects: Project A and Project
B**

**Project A**: CF_{0}= -6000; CF_{1-5}= 2000; I/YR = 14.

Calculate NPV, IRR, MIRR, Payback period, and discounted payback period for Project A.

**Project B**: CF_{0} = -18000;
CF_{1-5} = 5600; I/YR = 14.

Calculate NPV, IRR, MIRR, Payback period, and discounted payback period for Project B.

**b.** If the two projects are independent, which
project(s) would be accepted?

**c.** If the two projects are mutually exclusive,
which project would be accepted?

**d.** Is there conflict using both NPV and IRR
approaches? If yes, why?

**11-3** Calculate MIRR for the above project in
11-1.

**11-4** Calculate the payback period of the above
project.

**11-5** Calculate the discounted payback period of
the above project.

Answer #1

11)

(A)
A company is considering a major expansion of its product line. The
initial outlay would be $10,100,000 and the project would generate
cash flows of $1,290,000 per year for 20 years. The appropriate
discount rate is 10%. (a) calculate the NPV (b) calculate the PI
(c) calculate the IRR (d) should this project be excepted?
(B) The same company is considering a new system for its lot.
The system will provide annual labor savings and reduced waste
totaling $175,000...

A firm with a 14% WACC is evaluating two projects for this
year's capital budget. After-tax cash flows, including
depreciation, are as follows:
0
1
2
3
4
5
Project M
-$9,000
$3,000
$3,000
$3,000
$3,000
$3,000
Project N
-$27,000
$8,400
$8,400
$8,400
$8,400
$8,400
Calculate NPV for each project. Do not round intermediate
calculations. Round your answers to the nearest cent.
Project M: $
Project N: $
Calculate IRR for each project. Do not round intermediate
calculations. Round your answers to...

ABC Corporation is considering a project that provides the
following cash flows steam:
Year
0
1
2
3
4
5
Cash flows
-$1,000
$375
$425
$250
$110
$100
If WACC is 10%, what is NPV and should the company accept the
project?
Find IRR, MIRR, payback, and discounted payback period.
Considering the following projects.
Project
Year
0
1
2
3
4
A
Cash flows
-$100
$35
$35
$35
$35
B
Cash flows
-$100
$60
$50
$40
$30
Project A has...

A project has the following annual net cash flows:
Year 0: -19,000
Year 1: 8,000
Year 2: 11,000
Year 3: 6,000
Year 4: 4,500
1.The firm's WACC is 14%. Calculate IRR.
2. Calculate MIRR for the project in the previous problem.
3. Calculate the project's NPV. (Round to the nearest cent)
4. Calculate the project's EAA.
5. Calculate the project's payback period.
6. Calculate the project's discounted payback period. (Round to
two decimal places)

You are considering a project with an initial cash outlay of
$100,000 and expected free cash flows of $23,000 at the end of each
year for 6 years. The required rate of return for this project is
10 percent.
a. What is the project’s payback period?
b. What is the project’s discounted payback period?
c. What is the project’s NPV ?
d. What is the project’s PI ?
e. What is the project’s IRR ?
f. What is the project’s...

CAPITAL BUDGETING CRITERIA
A firm with a 14% WACC is evaluating two projects for this
year's capital budget. After-tax cash flows, including
depreciation, are as follows:
0
1
2
3
4
5
Project M
-$18,000
$6,000
$6,000
$6,000
$6,000
$6,000
Project N
-$54,000
$16,800
$16,800
$16,800
$16,800
$16,800
Calculate NPV for each project. Round your answers to the
nearest cent. Do not round your intermediate calculations.
Project M $
Project N $
Calculate IRR for each project. Round your answers to two...

CAPITAL BUDGETING CRITERIA
A firm with a 13% WACC is evaluating two projects for this
year's capital budget. After-tax cash flows, including
depreciation, are as follows:
0
1
2
3
4
5
Project M
-$27,000
$9,000
$9,000
$9,000
$9,000
$9,000
Project N
-$81,000
$25,200
$25,200
$25,200
$25,200
$25,200
Calculate NPV for each project. Round your answers to the
nearest cent. Do not round your intermediate calculations.
Project M $
Project N $
Calculate IRR for each project. Round your answers to two...

A firm is considering the two mutually exclusive investments
projects. Project Alpha requires an initial outlay of $600 and will
return $160 per year for the next seven years; Project Beta
requires an initial outlay of $1,100 and will return $350 per year
for the next five years. Assuming a 11% required return, calculate
the NPV, Payback Period, and MIRR of each project.
Please help by showing Excel calculations. Thanks!

LO 3 LO 4 7.
Calculating NPV and IRR. A project that provides annual cash
flows of $2,620 for eight years costs $9,430 today. Is this a good
project if the required return is 8 percent? What if it's 24
percent? At what discount rate would you be indifferent between
accepting the project and rejecting it?
LO 4 9.
Calculating NPV. For the cash flows in the previous problem,
what is the NPV at a discount rate of...

11-1 How are project classifications used in the capital
budgeting process?
11-2 What are three potential flaws with the regular payback
method? Does the discounted payback method correct all three flaws?
Explain.
11-3 Why is the NPV of a relatively long-term project (one for
which a high percentage of its cash flows occurs in the distant
future) more sensitive to changes in the WACC than that of a
short-term project?
11-4 What is a mutually exclusive project? How should managers...

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