Question

**How do I solve this? Need to show work.**

Questions:

#1 - #3: A small factory that makes electrical components is considering a project which might generate future cash flows as follows. The company will make a decision whether they will undertake this project based on the Net Present Value analysis/Payback period/IRR method.

Project:

Initial investment = $100 million

Net cash flows Year 1 Year 2 Year 3 Year 4

($million) 34 30 40 36

1. What is the payback period of this project? If the hurdle period for the payback period method to evaluate this project is 4 years, what is your decision on this project?

Answer: Around 3 years and accept

2. What is the Net Present Value of these cash flows assuming that the WACC (can used as a discount rate) of the factory is 10%? What is your decision on this project based on the result from NPV of this project?

Answer: $10.346 million and accept

3. What is the IRR (Internal Rate of Return) of this project? If the WACC of the factory is 10%, what is your decision on this project?

Answer: 14.58% and accept

Answer #1

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...

Senior management asks you to recommend a decision on which
project(s) to accept based on the cash flow forecasts provided.
Relevant information:
The firm uses a 3-year cutoff when using the payback
method.
The hurdle rate used to evaluate capital budgeting projects is
15%.
The cash flows for projects A, B and C are provided below.
Project A
Project B
Project C
Year 0
-30,000
-20,000
-50,000
Year 1
0
4,000
20,000
Year 2
7,000
5,000
20,000
Year 3
20,000...

Please show your steps! Question 1
a) What is the NPV, IRR, and payback period of a project with
the following cash flows if WACC is 20%?
Time: 0
1
2
3
4
5
-$350,000
$100,000
$100,000
$100,000
$50,000
$50,000
NPV=
IRR=
Payback period=
b) Should you accept or reject the project according to NPV and
IRR?
*can you please include greater than an less than signs.* Thank
you.

QUESTION 1
Year
Cash flow
0
-1075
1
350
2
450
3
375
4
300
A firm is evaluating a potential capital expenditure project.
The project will last for 4 years and has the above expected cash
flows. The firm has a WACC of 15%. What is the project's NPV? If
NPV is negative, enter the number with a minus sign. Use 2 decimal
places
Year
Cash flow
0
-1075
1
350
2
450
3
375
4
300
The firm...

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.

Use the following information to answer questions 1 through 4:
Bumble Bees has identified the following project. The required
return on the project is 9 percent. Year Cash Inflows 0 -$150,000 1
$90,000 2 $70,000 3 $90,000 4 $100,000 1. What is the net present
value of the project? 2. What is the IRR of the project? 3. What is
the payback period of the project? 4. What is the profitability
index of the project? 5. If a project’s payback...

JAYCO is considering acquiring the manufacturer of a key component
part used to build its automobiles. The acquisition cost is
estimated at $2 million. JAYCO estimates annual cash flows of
$120,000 in Year 1; $210,000 in Year 2; $450,000 in Year 3;
$1,000,000 in Year 4; and $1,250,000 in Year 5. The required return
for this project is 12%. What is the NPV of this project ($):Should
JAYCO accept or reject this project based on the NPV rule?What is
the...

[Use the
following information to answer the next 6 questions.]
A firm has a WACC of
8% and is deciding between two mutually exclusive projects. Project
A has an initial investment of $63. The additional cash flows for
project A are: year 1 = $20, year 2 = $39, year 3 = $67. Project B
has an initial investment of $73.The cash flows for project B are:
year 1 = $60, year 2 = $45, year 3 = $32.
a....

(Please show calculations and formulas that are used so I can
better understand and work along. Thanks!)
GHI is considering two investment proposals. Estimated cash
flows are below. Each will require an initial cash outlay, followed
by several years of positive cash flows. Each project will
terminate and all assets will be liquidated in year 6. GHI’s WACC
is 9%.
Year
Project 1
Project 2
Initial outlay
$1,000,000
$500,000
1
$160,000
$120,000
2
$200,000
$120,000
3
$300,000
$120,000
4
$400,000...

1. Learning Objectives
(a) Develop proforma Project Income
Statement Using Excel Spreadsheet
(b) Compute Net Project Cash
flows, NPV, IRR and PayBack Period
1) Life Period of the Equipment = 4 years
8) Sales for first year (1)
$ 200,000
2) New equipment cost
$ (200,000)
9) Sales increase per year
4%
3) Equipment ship & install cost
$ (25,000)
10) Operating cost:
$ (120,000)
4) Related start up cost
$ (5,000)
(60 Percent of Sales)
-60%
5) Inventory increase
$ 25,000
11) Depreciation (Straight Line)/YR
$ (60,000)
6) Accounts Payable...

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