Calculating ETC, EAC, and VAC in Project Management

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Calibri 11 A A % в I U Alignment Number Conditional Format as Cll Cells Editing Paste Formatting Table Styles Clipboard Font Styles B24 fe A B C D 1 Laurman, Inc. is considering the following project: 2 Required investment in equipment 2$ 2,205,000 3 Project life 7 4 Salvage value 225,000 5 6 The project would provide net operating income each year as follows: 7 Sales 2,750,000 8 Variable expenses 9 Contribution margin 10 Fixed expenses: 1,600,000 2$ 1,150,000 11 Salaries, rent and other fixed out-of pocket costs 520,000 12 Depreciation 13 Total fixed expenses 350,000 870,000 14 Net operating income 280.000 15 16 Company discount rate 18% 17 18 1. Compute the annual net cash inflow from the project. 19 20 2. Complete the table to compute the net present value of the investment. 21 22 Year(s) 23 Now 1-7 Sheet1 ... > %24

26 Exercises 3, 5-7, 14 &18 & 15, Tableau D...i bok int rint rences Information for two alternative projects involving machinery investments follows: Initial investment Salvage value Annual income Required A Project 1 $ (122,000) Required B Project 1 Project 2 0 15,250 a. Compute accounting rate of return for each project. b. Based on accounting rate of return, which project is preferred? Complete this question by entering your answers in the tabs below. Project 2 $ (92,000) 12,000 12,480 Compute accounting rate of return for each project. Numerator: Saved Accounting Rate of Return I < Prev Denominator: 3 of 9 IL Next Accounting rate of return

x E My Home CengageNOWv2 |Online teachir x+ now.com/ilrn/takeAssignment/takeAssignmentMain.do?invoker=&takeAssignmentSessionLocator=&inpro. ta o 伯 Determine the average rate of return for a project that is estimated to yield total income of $250,000 over 4 years, costs $480,000, and has a $20,000 residual value. Next Previous Submit Test for Grading

12 nts 3 03:38:35 eBook Hint Print eferences Your firm is contemplating the purchase of a new $580,000 computer-based order entry system. The system will be depreciated straight-line to zero over its five-year life. It will be worth $92,000 at the end of that time. You will be able to reduce working capital by $117,000 (this is a one-time reduction). The tax rate is 24 percent and the required return on the project is 12 percent. If the pretax cost savings are $150,000 per year, what is the NPV of this project? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) NPV Will you accept or reject the project? Reject Accept If the pretax cost savings are $115,000 per year, what is the NPV of this project? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

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X Paste FILE A1 Clipboard G 6 7 8 • HOME Calibri 4 INSERT BIU 16 Cost of Capital 17 ▶ ⠀ 14 Net operating income 15 READY Attempt(s) A 1 Laurman, Inc. is considering the following project: 2 Required investment in equipment 3 Project life 4 Salvage value 5 11 Font PAGE LAYOUT The project would provide net operating income each year as follows: Sales Variable expenses 9 Contribution margin 10 11 12 Depreciation 13 Total fixed expenses À À A- Fixed expenses: Salaries, rent and other fixed out-of pocket costs Sheet1 FORMULAS Wrap Text === **Merge & Center Alignment X ✓ fxx Laurman, Inc. is considering the following project: Гу 18 1. Compute the annual net cash inflow from the project. 19 (+) DATA B Comparison of Capital Budgeting Methods - Excel VIEW REVIEW 18% $ 0 $ General - $ %, Number с +.0 .00 .00 .0 1,750,000 5 years 225,000 520,000 350,000 $ 1 $ Conditional Format as Cell Formatting Table Styles Styles $ D 20 2. Complete the following timeline to compute the net present value of the…

QUESTION 3 Project Year 0 Year 1 Year 2 Year 3 A -$200 $100 $100 $100 B -$300 $175 $125 $125 Based on the payback rule, which of the following is false? With a payback cutoff of 1.5 years, both projects are unacceptable. You would be indifferent between the two projects. With a payback cutoff of three years, both projects are acceptable. With a payback cutoff of one year, neither project is acceptable. Since both projects pay back, the NPV of both must be positive.

QUESTION 5Read the information below and answer the following questionsINFORMATIONThe management of Mastiff Enterprises has a choice between two projects viz. Project Cos and Project Tan, each ofwhich requires an initial investment of R2 500 000. The following information is presented to you:PROJECT COS PROJECT TANNet Profit Net ProfitYear R R1 130 000 80 0002 130 000 180 0003 130 000 120 0004 130 000 220 0005 130 000 50 000A scrap value of R100 000 is expected for Project Tan only. The required rate of return is 15%. Depreciation is calculated using the straight-line method.5.4 Benefit Cost Ratio of Project Cos (expressed to three decimal places). 5.5 Internal Rate of Return of Project Cos (expressed to two decimal places) USING INTERPOLATION.

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MyUSF My Home 4 CengageNOWv2 | Online teachin X + ngagenow.com/ilrn/takeAssignment/takeAssignmentMain.do?invoker=&takeAssignmentSessionLocator=&inpro.. to Determine the average rate of return for a project that is estimated to yield total income of $270,400 over 4 years, costs $615,000, and has a $61,000 residual value.

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Question 6 XY Company is considering 5 investment projects as follows:                   Project Investment ($) Profitability index (PI) A 10,000 1.2 B 6,000 1.1 C 18,000 1.6 D 14,000 0.9 E 12,000 1.3 The company has $30,000 available for investment. Projects C and E are mutually exclusive. All projects can be undertaken only once and are not divisible. Required: (ii)Rank the projects PI and NPV

CENGAGE MINDTAP Week 6 Homework Your division is considering two projects with the following cash flows (in millions): 0 2 1 % Project A -$20 Project B -$13 a. What are the projects' NPVs assuming the WACC is 5%? Enter your answer in millions. For example, an answer of $10,550,000 should be entered as 10.55. Negative values, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to two decimal places. Project A: $ million million Project B: $ What are the projects' NPVs assuming the WACC is 10%? Enter your answer in millions. For example, an answer of $10,550,000 should be entered as 10.55. Negative values, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to two decimal places. Project A: $ million Project B: $ million What are the projects' NPVs assuming the WACC is 15%? Enter your answer in millions. For example, an answer of $10,550,000 should be entered as 10.55. Negative values,…

sions Question 1 rences View Policies porations Current Attempt in Progress PLUS Support Bonita's Manufacturing Company can make 100 units of a Central necessary component part with the following costs: e 365 $119000 Direct Materials 24000 Direct Labor ges 53000 Variable Overhead za 30000 Fixed Overhead If Bonita's Manufacturing Company can purchase the component externally for $195000 and only $6000 of the fixed costs can be avoided, what is the correct make-or-buy decision? O Make and save $7000 O Make and save $22000 Buy and save $7000 OBuy and save $22000 ip

Problem 5-1 Calculating Payback Period and NPV Janina, Incorporated, has the following mutually exclusive projects.    Year Project A Project B 0 −$ 30,000 −$ 33,000 1 17,000 18,000 2 13,500 12,000 3 3,900 13,500    a-1. Calculate the payback period for each project. (Do not round intermediate calculations and round your answers to 3 decimal places, e.g., 32.161.)             a-2. If the company's payback period is two years, which, if either, of these projects should be chosen?       multiple choice 1 Project A Project B Both projects Neither project    b-1. What is the NPV for each project if the appropriate discount rate is 15 percent? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)            b-2. Which, if either, of these projects should be chosen if the appropriate discount rate is 15 percent?…

Question 36 The following mutually exclusive projects are available. Which should be chosen? Project PW(Costs) PW(Benefits) A 1 500 000 2 400 000 В 1 1 800 000 1 900 000 900 000 1 800 000 2 700 000 4 200 000 2 100 000 1 900 000 O a. A O b. C O.B O d. D

Table 1: The Planned Value of Work Done Schedule Jan Feb March Project A Project B Project C Project D 60,000 100,000 80,000 120,000 100,000 80,000 80,000 120,000 120,000 120,000 70,000 100,000 April 120,000 140,000 90,000 120,000 Мay 200,000 140,000 100,000 150,000 Based on the data obtained from each project, you have found out the value of work done on the 31st of March, which is shown in Table 2 below. Table 2: The Actual Value of Work Done and Direct Cost Incurred as of the 31st of March Project Actual Value of Work Done 300,000 250,000 250,000 280,000 Direct Cost Incurred A 220,000 180,000 200,000 240,000 Each project is supposed to contribute 10% profit and 8% orerhead to the compoany. You are requested to present to the company the turnorer as of the 31st of march. Prepare your answenr by answering the following que'stions. a) Calculate the planned ralue of work done, the total planned orerhead and the total profit contribution from all the. projects as of the 31st of March. b)…

NPV Project A Project X $0 Cost of Capital 0% 22% 30% 12% What is the IRR of Project A? O A. 12% В. 30% С. 22% D. 8% E. The IRR of Project A

Question 3 You are considering the following three mutually exclusive projects. The required rate of return for all three projects is 14%. Year 1 3 A $ (1,000) $ 300 $300 $ 600 B $(5,000) $ 1,700 $ 1,700 $1,700 $1,700 C $(50,000) $0 $15,000 $ 28,500 $ 33,000 2 pts $300 What is the IRR of the best project? % terms to 2 decimal places w/o % sign Next

Project A B C D Investment Required $200,000 $ 152,000 $ 100,000 $ 170,000 Present value of Cash Inflows $ 279,323 $ 252,000 $ 210,035 $ 288, 136 Project The net present values should be computed using a 10% discount rate. The company wants your assistance in determining which project to accept first, second, and so forth. Required 1 Required 2 A B C D Life of the Internal Project Rate of (years) Return 7 16% 21% 20% 19% Required: 1. Compute the profitability index for each project. 2. In order of preference, rank the four projects in terms of net present value, profitability index, and internal rate of return. Complete this question by entering your answers in the tabs below. 12 7 3 Compute the profitability index for each project. (Round your answers to 2 decimal places.) Profitability Index 3

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Question No 08:                                                                          Marks (10) There are 4 Projects (mutually exclusive real asset projects) to choose from. The total budget is Rs.1, 000          Project       Io=Investment (Rs)   IRR  NPV(Rs)               A:                  200                      40%  300               B:                  100                      40%  300               C:                  300                      35%  200               D:                  800                      30%  600   Which 3 projects you will choose from the above 4 real asset projects? We cannot pick all 4 Projects because the Budget Constraint is 1000 and the total investment in all 4 Projects is 1400 (=200+100+300+800).

9–19 Following is information about two independent projects that a company is evaluating: Capital Budgeting Technique Project X Project Y Net Present Value $5,000 $4,950 Internal rate of return 15.5% 17.0% Discounted payback period 5.1 yrs 4.6 yrs       (a) Which project(s) should be chosen? Explain why. (b) What can be concluded about the company’s required rate of return, r?

Time 0 Time 1 Time 2 Time 3 Project A -10,000 5,000 4,000 3,000 If WiseGuy Inc is choosing one of the above mutually exclusive projects (Project A or Project B), given a discount rate of 7%, which should the company choose? O Both projects both have positive NPV. O Neither project both have negative NPV. O Project A Project B Project B -10,000 4,000 3,000 10,000

Table 1: The Planned Value of Work Done Schedule March 120,000 120,000 70,000 100,000 Jan Feb Project A Project B Project C Project D 60,000 100,000 80,000 120,000 100,000 80,000 80,000 120,000 Аpril 120,000 140,000 90,000 120,000 May 200,000 140,000 100,000 150,000 Based on the data obtained from each project, you have found out the value of work done on the 31st of March, which is shown in Table 2 below. Table 2: The Actual Value of Work Done and Direct Cost Incurred as of the 31st of March Project Actual Value of Work Done 300,000 250,000 250,000 280,000 Direct Cost Incurred 220,000 180,000 200,000 240,000 A Each project is supposed to contribute 10% profit and 8% orerhead to the compoany. You are requested to present to the company the turnorer as of the 31st of march. Prepare your answer by answering the following questions. a) Calculate the planned ralue of work done, the total planned orerhead and the total profit contribution from all the projects as of the 31st of march. b)…