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Date
Apr 3, 2024
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Uploaded by joeyleone
ADVANCED PROBLEM 11-2 FOR SPREADSHEET APPLICATIO
Given Data
Average company beta
1.05
Expected market return
11.00%
Risk-free rate
2.75%
Solution
Average hurdle rate
11.41%
Project
IRR
Beta
1
6.25%
0.35
reject 2
6.89%
0.65
reject 3
7.54%
0.55
reject 4
8.25%
0.70
reject 5
9.83%
0.85
reject 6
10.12%
0.95
reject 7
12.84%
1.15
accept 8
13.01%
1.25
accept 9
13.66%
1.40
accept 10
14.21%
1.50
accept 11
17.85%
1.45
accept 12
18.93%
1.55
accept Risk and cost of equity.
The following table is a list of potential projects in an all-eq
11%, and the risk-free rate is 2.75%, which projects are accepted and which are rejec
beta, which projects does it now accept that it previously rejected, and which project
firm accepts given the individual hurdle rates?
Accept or Reject vs.
Average Hurdle Rate
Requirements
1.
Start Excel - completed.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
Save the workbook. Close the workbook and then exit Excel. Submit the wo
In cell E14
, by using cell references, calculate the company's average hurdle
In cell F17
, by using absolute and relative cell references, enter the company
Use the Excel IF
function to enter "Accept" if the project's IRR is greater In cell range F18:F28
, by using absolute and relative cell references, enter th
company's average hurdle rate. Copy the content from cell F17
across the co
In cell G17
, by using cell references, calculate the risk-adjusted hurdle rate f
relevant cells from the Given Data
section.
In cell range G18:G28
, by using cell references, calculate the risk-adjusted h
column down to row 28
.
In cell H17
, by using absolute and relative cell references, enter the compan
rate. Use the Excel IF
function to enter "Accept" if the project's IRR is gre
In cell range H18:H28
, by using absolute and relative cell references, enter projects' risk-adjusted hurdle rates. Copy the content from cell H17
across th
In cell I17
, by using cell references, determine whether the company's decis
function to enter "No" if the decision based on the company's average hurdle
or "Yes" otherwise. In cell range I18:I28
, by using cell references, determine whether the compa
Copy the content from cell I17
across the column down to row 28
.
In cell J17
, by using a cell reference, enter the company's final investment d
Excel IF
function to enter "Yes" if the project is a go or "No" otherwise. In cell range J18:J28
, by using cell references, enter the company's final inv
hurdle rates. Copy the content from cell J17
across the column down to row
ON
5.64%
accept yes yes 0.08%
accept yes yes 0.00%
accept yes yes 0.00%
accept yes yes 11.10%
reject no no 0.31%
accept yes yes #VALUE!
#VALUE!
#VALUE!
#VALUE!
#VALUE!
#VALUE!
#VALUE!
#VALUE!
64.18%
reject yes no 55.28%
reject yes no 69.59%
reject yes no 84.59%
reject yes no quity firm. If the company has an average beta of 1.05, the expected return on the market is cted? If the company chooses a hurdle rate for each project based on the project’s listed ts does it now reject that it originally accepted? What is the final set of projects that the Risk-Adjusted
Hurdle Rate
Accept or Reject vs.
Adjusted Hurdle Rate
Decision
Changes
Is the
Project a GO?
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Points
0
1
1
1
1
1
1
1
1
1
1
1
orkbook as directed.
0
e rate. Use the relevant cells from the Given Data
section.
y's investment decision on project 1 based on the company's average hurdle rate. than the average hurdle rate
or "Reject" otherwise. he company's investment decisions on projects 2 through 12 based on the olumn down to row 28
.
for project 1. Use the project's beta in cell E17
and absolute references to the hurdle rates for projects 2 through 12. Copy the content from cell G17
across the ny's investment decision on project 1 based on the project's risk-adjusted hurdle eater than the risk-adjusted hurdle rate
or "Reject" otherwise. the company's investment decisions on projects 2 through 12 based on the he column down to row 28
.
sion on project 1 changes based on different hurdle rates. Use the Excel IF
e rate is the same as the decision based on the project's risk-adjusted hurdle rate any's decisions on projects 2 through 12 change based on different hurdle rates. decision on project 1 based on the project's risk-adjusted hurdle rate. Use the vestment decisions on projects 2 through 12 based on the projects' risk-adjusted w 28
.
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Details
WACC
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SGWN-O
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2
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4
5
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Question 20
An analyst estimates that project C's expected rate of return is 10%, your required rate of return of the project C is 7%, what should you do?
O None of the listed choices is correct
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Project Analysis Assignment i
1
Saved
Help
Save & Exit
Submit
Check my work
A project currently generates sales of $18 million, variable costs equal 60% of sales, and fixed costs are $3.6 million. The firm's tax rate
is 35%. Assume all sales and expenses are cash items.
a. What are the effects on cash flow, if sales increase from $18 million to $19.8 million? (Input the amount as positive value. Enter your
answer in dollars not in millions.)
Cash flow
increases
by $
47,000
b. What are the effects on cash flow, if variable costs increase to 70% of sales? (Input the amount as positive value. Enter your
answer in dollars not in millions.)
decreases
| by s
2$
117,000
Cash flow
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You wish to create a Data Table that calculates the NPV with various initial outlays in D1:E6. Which cell should be entered into the Data Table dialog box, and in which edit box?
arrow_forward
Activity Frame
B
r = 11%
0
1
2
3
4
40% Prob
Good
20.000 26.000 26.000 26.000 26.000
20,000 (r = 8%)
Bad
60% Prob.
20.000 7.000 7.000
0
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Plz do fast asap
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Risk and probability Micro-Pub, Inc., is considering the purchase of one of two microfilm cameras, R and S. Both should provide benefits over a 10-year period, and each requires an initial
investment of $5,000. Management has constructed the following table of estimates of rates of return and probabilities for pessimistic, most likely, and optimistic results:
a. Determine the range for the rate of return for each of the two cameras.
b. Determine the value of the expected return for each camera.
c. Which camera purchase is riskier? Why?
a. The range for the rate of return for camera R is
%. (Round to the nearest whole number.)
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Mc
Graw
Hill
Risk and Capital Budgeting
AA
Fill in the blank: Scenario analysis is made up of
several
Correct
Michael
Scenarios
Michael
We have created various scenarios each with
a forecast for our expected sales volume,
revenues, expenses, risks, etc.
At a high level, here are how each of the
scenarios looks like.
Calculate NPV for Scenario A.
Use the information provided on the right. Round to
the nearest whole number.
Submit
Enter a response then click Submit below
$0
Scenarios
Area 1.1
Scenario Comparison ($)
Scenario A
Scenario B
Scenario C
Initial
Investment
2,000,000
2,000,000
2,000,000
Expected interest rate: 12%
Forecasting period: 5 years
PV annuity factor: 3.6048
Annual Net
Income
545, 100
426,995
1,644,385
Annual Cash
Flow
656,890
-493, 005
2,564,385
NPV
-3,777, 184
7,244,095
Return to Activity
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Materials
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Use attachment to answer question
q3-
This question relates to the diagram, which shows the NPV profile for Projects X and Y.
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Select one:
a.
13%
b.
9%
c.
4%
d.
10%
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Spreadsheet Link What is the IRR of the following project?
Cash Flow
Year 0 32.000
9,000
2 10,000
15,200
3.
4.
7,800
1) 10.8%
2) 11.2%
• 3) 11.7%
4) 12.0%
5) 12.3%
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2. Dropdown menu 1 options are larger or smaller. Dropdown menu 2 options are earlier, more evenly or later. Dropdown menu 3 options are tracking technology or warehouse.
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Version Ai
Saved
Help
Save & Exit
Submit
Suppose the returns on a particular asset are normally distributed. The asset had an average return of 10.9 percent and a standard
deviation of 22.6 percent. Use the NORMDIST function in Excel® to determine the probability that in any given year you will lose
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