FIN 660 Computational HW 7

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University of Maryland Global Campus (UMGC) *

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660

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Finance

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Apr 3, 2024

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xlsx

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1 Cash inflows $650.00 period (yrs) 11 initial cost (a) $1,950.00 initial cost (b) $3,965.00 initial cost (c) $7,800.00 payback period (a) 3.00 payback period (b) 6.10 payback period (c) Never 2 Year Cash Flow 0 ($28,000.00) 1 $24,000.00 2 $14,000.00 3 $5,000.00 required return (a) 19% required return (b) 35% NPV (a) $5,021.45 NPV (b) ($508.26) 3 annual cash flows $19,000.00 period (yrs) 6 current cost $62,000.00 required return 12% NPV 16,116.74 IRR 20.77% 4 Year Cash Flow PV Factor (a) 0 ($6,100.00) 1.00 1 $6,600.00 1.00 2 $6,800.00 1.00 3 $6,000.00 1.00 a. What is the project payback period if the initial cost is $1,950? b. What i a. At a required return of 19 percent, what is the NPV for this project? b. At a required return of 35 percent, what is the NPV for this project? a. If the required return is 12 percent, what is the NPV for this project? b. D d. What is the NPV at a discount rate of 26 percent?
discount rate (a) 0% discount rate (b) 9% discount rate (c) 21% discount rate (d) 26% NPV (a) $13,300.00 NPV (b) $10,311.57 NPV (c) $7,385.88 NPV (d) $6,420.73 5 Year Cash Flow (a) Cash Flow (b) 0 ($36,300.00) ($36,300.00) 1 $18,600.00 $6,400.00 2 $14,100.00 $12,900.00 3 $11,600.00 $19,400.00 4 $8,600.00 $23,400.00 NPV 11% IRR (a) 19.75% IRR (b) 20.60% NPV (a) $6,047.54 NPV (b) $9,535.11 discount rate indifference 22.75% 6 Year Cash Flow PV Factor (a) 0 ($8,000.00) 1.00 1 $4,000.00 1.06 2 $4,700.00 1.12 3 $3,700.00 1.19 discount rate (a) 6% discount rate (b) 19% discount rate (c) 26% profitability index (a) 1.3829 profitability index (b) 1.1095 e. At what discount rate would the company be indifferent between these c. What is the profitability index for the cash flows if the relevant discount
profitability index (c) 0.9981 7 Year Cash Flow discounting 0 ($29,600.00) ($35,809.21) 1 $11,800.00 11,800.00 2 $14,500.00 14,500.00 3 $16,400.00 16,400.00 4 $13,500.00 13,500.00 5 ($10,000.00) 0.00 interest rate 10% discounting approach MIRR 20.13% reinvestment approach MIRR 15.66% combination approach MIRR 14.76% 8 Year Cash Flow (b) 0 $64,500.00 $64,500.00 1 ($30,500.00) ($27,853.88) 2 ($48,500.00) ($40,449.53) required return (b) 9.5% required return (c) 0.0% required return (d) 19.0% IRR 13.52% NPV (b) ($3,803.41) NPV (c) ($14,500.00) NPV (d) $4,620.75 9 Year Project A Project B 0 ($32,000.00) ($32,000.00) 1 $12,500.00 $20,650.00 2 $12,500.00 $10,500.00 3 $20,500.00 $12,670.00 c. MIRR using the combination approach. d. NPV at 19 percent? 3 20,500 12,670
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crossover rate 11.05% Since Project B has larger cash flows
PV of Cash Flow (a) PV Factor (b) PV of Cash Flow (b) PV Factor (c) ($6,100.00) 1.00 ($6,100.00) 1.00 $6,600.00 0.92 $6,055.05 0.83 $6,800.00 0.84 $5,723.42 0.68 $6,000.00 0.77 $4,633.10 0.56 is the project payback period if the initial cost is $3,965? c. What is the project pa Determine the IRR for this project.
b-a $0.00 ($12,200.00) ($1,200.00) $7,800.00 $14,800.00 PV of Cash Flow (a) ($0.00) $3,773.58 $4,182.98 $3,106.59 two projects? rate is 26 percent?
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reinvestment combination - $17,276.38 $19,299.50 $19,844.00 $14,850.00 ($10,000.00) (c) (d) $64,500.00 $64,500.00 ($30,500.00) ($25,630.25) ($48,500.00) ($34,248.99) a-b $0.00 ($8,150.00) $2,000.00 $7,830.00
s early, it will have the greater NPV at higher interest rates.
PV of Cash Flow (c) PV Factor (d) PV of Cash Flow (d) ($6,100.00) 1.00 ($6,100.00) $5,454.55 0.79 $5,238.10 $4,644.49 0.63 $4,283.19 $3,386.84 0.50 $2,999.44 ayback period if the initial cost is $7,800?
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