Question

Q1.

Babcock Inc. is considering a project that has the following cash flow and WACC data. What is the project's NPV? Enter your answer rounded to two decimal places. Do not enter $ or comma in the answer box. For example, if your answer is $12,300.456 then enter as 12300.46 in the answer box. |
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WACC: |
13% |
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Year: |
0 |
1 |
2 |
3 |
||||||

Cash flows: |
-$1,250 |
$400 |
$500 |
$600 |

Q2.

Garvin Enterprises is considering a project that has the following cash flow and WACC data. What is the project's discounted payback? Enter your answer rounded to two decimal places. For example, if your answer is 12.345 then enter as 12.35 in the answer box. |
|||||||||

WACC: |
12% |
||||||||

Year: |
0 |
1 |
2 |
3 |
|||||

Cash flows: |
-$1,100 |
$550 |
$550 |
$550 |

Answer #1

1). NPV = PV of Cash Inflows - PV of Cash Outflows

= [$400/1.13] + [$500/1.13^{2}] +
[$600/1.13^{3}] - $1,250

= $353.98 + $391.57 + $415.83 - $1,250 = -$88.61

2).

Year | CFs | Discounted CFs @ 12% | Cumulative Discounted CFs |

0 | -1,100 | -1,100 | -1,100 |

1 | 550 | 491.07 | -608.93 |

2 | 550 | 438.46 | -170.47 |

3 | 550 | 391.48 | 221.01 |

Discounted Payback Period = Years before full recovery +

[Unrecovered Discounted Cfs at start of the year / Discounted CF during the year]

= 2 + [170.47/391.48] = 2 + 0.44 = 2.44 years

Hindelang Inc. is considering a project that has the following
cash flow and WACC data. What is the project's MIRR? Enter your
answer rounded to two decimal places. Do not enter % in the answer
box. For example, if your answer is 0.12345 or 12.345% then enter
as 12.35 in the answer box.
WACC:
14%
Year:
0
1
2
3
4
Cash flows:
-$875
$350
$375
$400
$425

1.
Beta Enterprises, Inc. is considering a project that has
the following cash flow and WACC data. What is the project's NPV?
Enter your answer rounded to two decimal places. Do not enter $ or
comma in the answer box. For example, if your answer is $12,300.456
then enter as 12300.46 in the answer box.
WACC:
14%
Year:
0
1
2
3
Cash flows:
-$950
$500
$300
$400
2.
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Delta Enterprises, Inc. has a WACC of 12.50% and is considering
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is the project's MIRR? Enter your answer rounded to two decimal
places. Do not enter % in the answer box. For example, if your
answer is 0.12345 or 12.345% then enter as 12.35 in the answer
box.

Your company, Dominant Retailer, Inc., is considering a project
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Anderson Associates is considering two mutually exclusive
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Year Cash Flow Cash Flow 0 -$10,000 -$8,000 1 2,000 7,000 2 2,000
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At what cost of capital do the two projects have the same net
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projects that have the following cash flows:
Project
A
Project B
Year
Cash
Flow
Cash Flow
0
-$11,000
-$9,000
1
1,500
6,000
2
3,000
4,000
3
5,000
3,000
4
9,000
2,000
At what cost of capital do the two projects have the same net
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Year 0 1 2 3
Cash flows -$1,200 $400 $500 $500
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