11-7 CAPITAL BUDGETING CRITERIA A firm with a 14% WACC is evaluating two projects for this year's capital budget. After-tax cash flows, including depreciation, are as follows: 3. 4. + Project M Project N -$30,000 -$90,000 $10,000 $28,000 + $10,000 $28,000 $10,000 $28,000 $10,000 $28,000 $10,000 $28,000 a. Calculate NPV, IRR, MIRR, payback, and discounted payback for each project. b. Assuming the projects are independent, which one(s) would you recommend?

11-7 CAPITAL BUDGETING CRITERIA A firm with a 14% WACC is evaluating two projects for this year's capital budget. After-tax cash flows, including depreciation, are as follows: 3. 4. + Project M Project N -$30,000 -$90,000 $10,000 $28,000 + $10,000 $28,000 $10,000 $28,000 $10,000 $28,000 $10,000 $28,000 a. Calculate NPV, IRR, MIRR, payback, and discounted payback for each project. b. Assuming the projects are independent, which one(s) would you recommend?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Please answer the following MCQs and T or Fs from 1 till 14
Question 3 Midwest University has an annual budget of R5 000 000 for athletic scholarships. Each athletic scholarship is for R20 000 per annum. Fixed operating costs of the athletics scholarship program are R600 000, and variable operating costs are R2 000 per scholarship offered. Required: 3.1 Calculate the number of athletic scholarships Midwest University can offer each year. 3.2 Suppose the total budget for next year is reduced by 22%. Fixed costs are to remain the same. Calculate the number of athletic scholarships that Midwest can offer next year. 3.3 As in 3.2 above, assume a budget reduction of 22% and the same fixed costs. If Midwest wanted to offer the same number of athletic scholarships as it did in 3.1, calculate the amount that will be paid to each student who receives a scholarship.
13. An investment requires working capital equal to 15% of the year’s sales revenue to be in place at the start of the relevant year. The sales revenue for the three year project is forecast as £80,000, £100,000 and £90,000. What is the cashflow relating to working capital at time 2? A £1,500 outflow B £3,000 outflow C £1,500 inflow D £3,000 inflow
Vd Sub: accounting
Problem 6-19 Capital Budgeting with Inflation Consider the following cash flows on two mutually exclusive projects: Year Project A -$ Project B -$ 0 54,000 69,000 1 34,000 33,000 2 29,000 42,000 3 24,000 45,000 The cash flows of Project A are expressed in real terms, whereas those of Project B are expressed in nominal terms. The appropriate nominal discount rate is 10 percent and the inflation rate is 4 percent. Calculate the NPV for each project. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) Project A Project B Which project should you choose? Project A Project B
Question 3 A company has $20 million available to invest in new projects. There are three independent projects that it is considering. The after-tax cash flows of the projects are as follows: Project ABC Year 0 cash flow (20 million) (10 million) (10 million) Year 1 cash flow 20 million 8 million 6 million Year 2 cash flow 10 million 7 million 10 million Calculate the IRR, PI and NPV of each of the two-year projects and recommend which project(s) the company should invest in (and why). The company's cost of capital is 12%.
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A8
QUESTION 4 A capital budget: projects revenues, expenditures, and cash flow on a monthly basis is done once every 15 years accounts for the major capital expenditures of the organization and is normally prepared to cover a number of budget years None of the above
Problem 5-29 Calculating Incremental Cash Flows Darin Clay, the CFO of MakeMoney.com, has to decide between the following two projects: Year Project Million Project Billion 0123 -$2,500 0-290 -$10 0+1,050 1.090 1.850 1,850 2,900 The expected rate of return for either of the two projects is 13 percent. What is the range of initial investment (0) for which Project Billion is more financially attractive than Project Million? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Initial investment less than
Capital Budgets Rambus Inc. would like to purchase a production machine for $325,000. The machine is expected to have a life of three years, and a salvage value of $50,000. Annual maintenance costs will total $12,500. Annual savings are predicted to be $112,500. The company's required rate of return is 12%. Factors: Present Value of $1 (r = 12%)Year 0 1.0000 Year 1 0.8929 Year 2 0.7972 Year 3 0.7118 Required: (1) Using the Present Value Factors for $1, calculate the net present value of this investment (ignoring taxes). (2) Based on your answer in requirement 1, should Rambus purchase the production machine?
Question 1 Investment of RM820,000 in new machine to expand production capacity is being consideration by a company. Following are the budgeted cash flows given for next 6 year 1st year 2nd year 3rd year 4th year 5th year 6th year cash flow 80 110 160 250 220 180 1. Calculated discounted payback period Discount factors at the cost of capital of 10% per annum 1st year 2nd year 3rd year 4th year 5th year 6th year 0.909 0.826 0.751 0.683 0.621 0.564 Please donot provide solution in image format provide solution in step by step format and fast solution