A company is considering two mutually exclusive projects. Both require an initial cash outlay of Rs.20000 each, and have a life of five years. The company’s required rate of return is 10% and pays tax at a 35% rate. The projects with be depreciated on a straight – line basis. The before taxes cash flows expected to be generated by the projects are as follows. Before-tax cash flows (Rs.) Project1 2 3 4 5 A 8000 8000 8000 8000 8000B 12000 6000 4000 10000 10000 calcualte for each project: The NPV and the internal rate of return. Which project should be accepted and why.

Q: The Acme Widget Company is considering two mutually exclusive projects with the following after-tax…

A: Net present value is the excess of present value of inflows over outflows.

Q: Consider the following after-tax cash flows: (a) Compute the project balances for Projects A and D,…

A: Cash flows are the cash and cash equivalents that flows in and out of the business in a particular…

Q: A project with a life of 8 years is expected to provide annual sales of $440,000 and costs of…

A: Annual Operating Cash Flow for the Best-Case Scenario Annual Sales = $506,000  [$440,000 *115%]…

Q: Duo Corporation is evaluating a project with the following cash flows: Year Cash Flow 0 -$ 29,100 1…

A: Step 1: Step 2: Step 3: Step 4:

Q: The Fleming Manufacturing Company is considering a new investment. Financial projections for the…

A: Net present value (NPV) is the value of all the cash flow of the investment (positive and negative)…

Q: St. John's Shipyard is considering the replacement of an 8-year old machine that has been fully…

A: As per honor code, we can provide solution to only first question, so here we go:   NPV calculates…

Q: Consider two mutually exclusive projects – Project X and Project Y with identical initial outlays of…

A: Capital budgeting means taking decisions related to investments. Capital investments involve the…

Q: A project with a life of 5 years is expected to provide annual sales of $250,000 and costs of…

A: Annual Sales = $ 250000 Cost =$ 165000 Tax rate 21% Life of project 5 years Project will require an…

Q: Maven Design Inc. is considering two investment projects, X and Y. Company’s cost of capital is…

A: Various capital budgeting tools can be used by the investors for the assessment of the project's…

Q: Answer each independent question, (a) through (e), below. a. Project D costs $10,000 and will…

A: book rate of return based on the average book value=Average net profit/Average investment…

Q: Doak Corp. is evaluating a project with the following cash flows: Cash Flow -$16,200 7,300 8,500…

A: YearCash flow0 $ -16,200.001 $ 7,300.002 $ 8,500.003 $ 8,100.004 $ 6,900.005 $ -4,300.00Discount…

Q: Duo Corporation is evaluating a project with the following cash flows: Year Cash Flow 0 -$ 28,900 1…

A: Modified Internal Rate of Return (MIRR) is a financial metric used in capital budgeting that adjusts…

Q: deep waters inc is using the internal rate of return (IRR) when evaluating projects. Find the IRR…

A: IRR is also known as Internal rate of Return. It is a capital budgeting technique which helps in…

Q: Suppose an asset has a first cost of $8,000,a life of five years, a salvage value of $2,000 atthe…

A: Cash Flow form Operation after tax may be calculated using either: Direct method or Indirect method.…

Q: project with a life of 7 years is expected to provide annual sales of $430,000 and costs of…

A: Operating cash flow is the cash flow from main business core operating activities after making…

Q: Calculate the MIRR of the project using all three methods.

A: The modified internal rate of return is used in capital budgeting to evaluate the profitability of…

Q: A project requires an initial investment of $200,000 and expects to produce a cash flow before taxes…

A: NPV means Net Present value.It is calculated by deducting initial investment from present value of…

Q: The company uses en interest rate of 11 percent on all of its projects. Calculate the MIRR of the…

A: The modified internal rate of return is used in capital budgeting to evaluate the profitability of…

Q: World Trans. is considering two mutually exclusive projects. Both require an initial investment of…

A: The difference between the current value of cash inflows and outflow of cash over a period of time…

Q: The Butler-Perkins Company (BPC) must decide between two mutually exclusive projects. Each Project…

A: Coefficient of variation computed as follows:-Coefficient of variation =

Q: Duo Corporation is evaluating a project with the following cash flows: Year Cash Flow 0 −$ 15,200 1…

A: MIRR refers to the modified IRR which is more appropriate when there are series of cash flows with a…

Q: What is the incremental after-tax operating cash flow (OCF)

A: Incremental sales = $2,400,000 Incremental expenses = $1,400,000 Tax rate = 32% Initial Investment =…

Q: Duo Corporation is evaluating a project with the following cash flows: Year Cash Flow 0 -$ 16,600 1…

A: MIRR is the modified internal rate of return, it is used to evaluate the attractiveness of the…

Q: A company anticipates a taxable cash expense of $80,000 in year 2 of a project. The company's tax…

A: Cash expense $80,000   Less: Tax benefit ($80,000 x 30%) $24,000   Net cash expense $56,000

Q: The company uses an interest rate of 9 percent on all of its projects. Calculate the MIRR of the…

A: The modified internal rate of return is used in capital budgeting to evaluate the profitability of…

Q: A proposed new project has projected sales of $215,000, costs of $104,000, and depreciation of…

A: Sales = s = $215,000Cost = c = $104,000Depreciation = d = $25,300Tax Rate = tr = 23%

Q: A project with a life of 6 years is expected to provide annual sales of $380,000 and costs of…

A: Given: Particulars Base case Sales $380,000.00 Cost $269,000.00 Tax rate =21%

Q: The Company is considering an investment that, if paid for immediately, is expected to return…

A: SOLUTION-   FORMULA- PRESENT VALUE = FUTURE VALUE * 1 / (1+INTEREST RATE ) ^TIME PERIOD .

Q: In your first job with TBL Inc. your task is to consider a new project whose data are shown below.…

A: The Year 1 cash flow for the project at TBL Inc. is determined by first calculating the net profit…

Q: A project with a life of 9 years is expected to provide annual sales of $ 410,000 and costs of…

A: Annual sales = $410000Annual costs = $293000Initial investment =$715000Life of the project = 9…

Q: A 7-year project is expected to provide annual sales of $221,000 with costs of $97,500. The…

A: Worst-case scenario is determined as part of sensitivity analysis. As per this, the revenue and…

Q: Chase Brew Inc is considering an investment with the following information: initial…

A: To answer this question 1st we can calculate depreciation per year. Depreciation = Cost of the…

Q: (a) Calculate the net present value for each project

A: Information Provided: Cost of capital = 15% Initial Outlay = RM 90,000 Project X free cash flow = RM…

Q: Ela incorporated uses discounted payback period for projects under PhP 25.000 and has a cut off…

A: Capital budgeting is the process by which a corporation examines potential large projects or…

Q: Suppose an asset has a purchase cost of $15,000, a life of five years, a salvage value of $3,000 at…

A: Cash flow: Cash flow refers to the amount of cash or cash equivalent that comes in or goes out for a…

Q: A project with a life of 6 years is expected to provide annual sales of $260,000 and costs of…

A: Sales revenue $  260,000Costs $  173,000Initial investmentSales revenue $  260,000Costs $…

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.