### Project Evaluation Exercise#### Net Present Value Calculation**Scenario:**A company is considering a project that requires an initial cost of $14,500. The project will generate the following net cash inflows:- Year 1: $1,100- Year 2: $5,700- Year 3: $1,450- Year 4: $16,000- Year 5: $18,500The task is to calculate the Net Present Value (NPV) using a discount rate of 6%. Below is a table to compute the NPV:| Year | Net Cash Inflow | Present Value (PV) Factor | Present Value (PV) ||------|------------------|---------------------------|--------------------|| 0 | $(14,500) | | || 1 | $1,100 | | || 2 | $5,700 | | || 3 | $1,450 | | || 4 | $16,000 | | || 5 | $18,500 | | || | | | **NPV Total** |**Note:** Enter amounts rounded to two decimals (e.g., 78.76 or 400.00).The NPV formula is:\[ NPV = \sum \left( \frac{Net \ Cash \ Inflows}{(1 + r)^t} \right) - Initial \ Investment \]Where:- $ r $ is the discount rate (6% or 0.06)- $ t $ is the year**Instructions:**1. Calculate the PV for each year using the formula $ PV = \frac{Net \ Cash \ Inflow}{(1 + r)^t} $.2. Sum all the PVs from Year 0 to Year 5.3. Subtract the initial investment to get the NPV.This exercise helps in understanding the NPV method, which is a fundamental concept in financial management for evaluating capital projects.

Capital budgeting is one of the useful concept being used in finance. It helps in selection of…

5 Flag question 3 2 NPV Total 0 $18,500 $18,500 in year five. What is the NPV using 6% as the discount rate? pany is considering a project that requires an initial cost of $44,500. The project will generate after-tax het cash inflows of $1,100 in year one, $5,700 in year two, $14,500 in year three, $16,000 in year four, and NOTE: Enter amounts rounded to two decimals (e.g., 78.76 or 40.00). Net Cash Inflow Year $16,000 $14,500 $5,700 $1,100 PV

5 Flag question 3 2 NPV Total 0 $18,500 $18,500 in year five. What is the NPV using 6% as the discount rate? pany is considering a project that requires an initial cost of $44,500. The project will generate after-tax het cash inflows of $1,100 in year one, $5,700 in year two, $14,500 in year three, $16,000 in year four, and NOTE: Enter amounts rounded to two decimals (e.g., 78.76 or 40.00). Net Cash Inflow Year $16,000 $14,500 $5,700 $1,100 PV

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Question 24 The Flour Baker is considering a project with the following cash flows. Should this project be accepted based on its internal rate of return if the required return is 5 percent? Year Cash Flows 0 -$200,000 1 40,000 2 50,000 3 60,000 4 70,000 Group of answer choices Yes, because the project’s IRR is higher than the required rate Yes, because the project’s IRR is lower than the required rate No, because the project’s IRR is higher than the required rate No, because the project’s IRR is lower than the required rate You are indifferent
#3
%23 Compute the discounted payback statistic for ProjectCif the appropriate cost of capital is 7 percent and the maximum allowable discounted payback period is three yearss. (Do not round Intermedlate colculatlons ond round your final answer to 2 declmal places.) Project C 1. $1,840 3. $940 4. $580 2. 5. Cash flow: -%242,400 Discounted payback period years. Should the project be accepted or rejected? Vaccepted O rejected
4 Book Consider two mutually exclusive new product launch projects that Nagano Golf is considering. Assume that the discount rate for Nagano Golf is 16 percent Project A Nagano NP-30. Professional clubs that will take an initial investment of $971,000 at time 0. Next five years (years 1-5) of sales will generate a consistent cash flow of $440,000 per year. Introduction of new product at year 6 will terminate further cash flows from this project Project B Nagano NX-20 High-end amateur clubs that will take an initial investment of $700,000 at time 0. Cash flow at year 1 is $290,000. In each subsequent year, cash flow will grow at 10 percent per year. Introduction of new product at year 6 will terminate further cash flows from this project. Year e 1 2 3 4 NP-30 -$971,000 440,000 440,000 440,000 440,000 440,000 NX-20 -$700,000 290,000 319,000 350,900 Net present value Internal rate of return 385,990 424,589 Complete the following table: (Do not round intermediate calculations. Round the…
A3 5b 5. We have two independent and mutually exclusive projects, A and B. Project A requires an initial investment of $1500, and will yield $800 of cash inflows for the next three years. Project B requires an initial investment of $5000, and will yield $1,500 of cash inflows for the next five years. The required return on each project is 10%. b. What is the problem with using the NPV investment criterion in this case? What alternative criterion should be used?
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
21 What is the equivalent annual cost for a project that requires a $40,000 investment at time-period zero, and a $10,000 annual expense during each of the next 4 years, if the opportunity cost of capital is 10%? g OD A $20,000.00 B. $21,356.95 С. $22,618.83 D. $25,237.66 O A OB ос
1
i will 5 upvotes urgent A firm wants to sponsor a new engineering lab at a local university. This requires $4.0M to construct the lab, $1.5M to equip it, and $750,000 every 6 years for new equipment. What is the required endowment if the university will earn 8% interest on the funds?
Sh 14 Please help me Thankyou.
7
You have established your performance materiality for accounts payable and revenue; now you must determine the posting materiality for individual items. The materiality judgement is at 4%. What is the posting materiality? Show your work. Your work should look like: APPROPRIATE AMOUNT x MATERIALITY JUDGEMENT = POSTING MATERIALITY