A corporation decides whether to undertake a project that requires an investment of $150 million now (in 2022) and of $100 million in 2023. The project will bring $50 million in 2024, $100 million in 2025, and $150 million in 2026. Find the NPV (i.e., the net present value) of the project and recommend whether the company should or should not pursue the project if the relevant interest rate is 7%.
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A corporation decides whether to undertake a project that requires an investment of $150 million now (in 2022) and of $100 million in 2023. The project will bring $50 million in 2024, $100 million in 2025, and $150 million in 2026. Find the NPV (i.e., the
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- Net present values for three alternative Investment projects follow. (a) If the company accepts all positive net present value Investments, which of these projects will it accept? (b) If the company can choose only one project, which will it choose? Potential Projects Net present value Project A $1,400 Project B $(12,100) Project C $15,000 (a) If the company accepts all positive net present value investments, which of these projects will it accept? (b) If the company can choose only one project, which will it choose?company is considering three independent projects for October 2021. The three projects are project X, project Y and project Z. Given the following cash flow information, calculate the payback period for each. If the company requires a 3-year payback before an investment can be made, which project(s) would be accepted? Year Project X ($) Project Y ($) Project Z ($) O (Investment) -2,000 -$10,000 -$5,000 1. -2,000 -6,000 -2,000 800 4,000 5,000 3 600 3,000 5,000 4 600 2,000 5,000 400 2,000 2,000(a) ABC Ltd. is considering investing in a 2-year project which is expected to generate the following year-end cash flows: C1 = $110 million, C2 = $115 million. The yearly discount rate for the project is 10%. The initial cost of the project is $200 million. (i) Compute the Profit (Revenue – Cost) and NPV of the project. (ii) Based on the answer of part (a), should the project be accepted? Explain. (b) John has just purchased an apartment at a price of $5,000,000. He made a down-payment of $2,000,000 and financed the remaining with a 30-year mortgage at 12% per annum, compounded monthly. (a) Determine the size of the fixed month-end payments. (b) Calculate the interest payment and the amount of principal paid in the 121st loan repayment.
- Rachel Foundation, Inc., a tax-exempt organization duly registered with the Securities and Exchange Commission, is planning to invest P280,000 in a project at the beginning of 2022. The estimated annual cash savings from this project is P90,000. The project will be depreciated over its five-year life on a straight-line basis. The foundation’s desired rate of return on investments of this type is 10%. 1. Using the built-in Excel formula, the present value of cash savings is: (Round off to the nearest whole number) 2. Based on your answer above, the investment project’s net present value is? 3. The investment project’s payback period is?Refer to the investment opportunities for 2023 and calculate the following. (Ignore taxes.) Accounting Rate of Return on average investment of Project A (expressed to two decimal places).Lopez Industries has identified the following two mutually exclusive capital investment projects: Year Project A Project B 0 -16000 -15500 1 400 12500 2 800 8000 3 13000 800 4 14000 800 What is the IRR for each of these projects? If you apply the IRR decision rule, which project should the company accept? Is this decision necessarily correct?
- Refer to the investment opportunities for 2023 and calculate the following. (Ignore taxes.)2.1 Accounting Rate of Return on average investment of Project Y (expressed to two decimal places)2.2 Net Present Value of both projects (showing all the relevant present value calculations)2.3 Internal Rate of Return of Project Y (expressed to two decimal places) using two net present values to form part of the calculations.Pseudo Enterprise has ambitious expansion plans for 2022. At a recent Annual General Meeting, the shareholders approved the proposal for further expansion and the board of directors has allocated £330,000 for new projects. As the Senior Manager of Pseudo Enterprise, you have been authorised to conduct the project appraisal for five new projects and submit a recommendation to management on how best to spend £330,000 for new projects. The projects you are considering have the following information: Year 0 (£,000) 1 (£,000) 2 (£,000) 3 (£,000) 4 (£,000) Project 1 -105 0 180 0 0 Project 2 -150 90 90 90 0 Project 3 -60 30 30 30 30 Project 4 -90 45 45 45 45 Project 5 -180 210 0 0 0 The cash flows are confined to the lifetime of each project. Apart from initial investments that occur at the beginning of the project, all cash flows occur at year end. The following information on the projects is…Pseudo Enterprise has ambitious expansion plans for 2022. At a recent Annual General Meeting, the shareholders approved the proposal for further expansion and the board of directors has allocated £330,000 for new projects. As the Senior Manager of Pseudo Enterprise, you have been authorised to conduct the project appraisal for five new projects and submit a recommendation to management on how best to spend £330,000 for new projects. The projects you are considering have the following information: Year 0 (£,000) 1 (£,000) 2 (£,000) 3 (£,000) 4 (£,000) Project 1 -105 0 180 0 0 Project 2 -150 90 90 90 0 Project 3 -60 30 30 30 30 Project 4 -90 45 45 45 45 Project 5 -180 210 0 0 0 The cash flows are confined to the lifetime of each project. Apart from initial investments that occur at the beginning of the project, all cash flows occur at year end. The following information on the projects is…
- Staten Corporation is considering two mutually exclusive projects. Both require an initial outlay of 150,000 and will operate for five years. The cash flows associated with these projects are as follows: Statens required rate of return is 10%. Using the net present value method and the present value table provided in Appendix A, which of the following actions would you recommend to Staten? a. Accept Project X and reject Project Y. b. Accept Project Y and reject Project X. c. Accept Projects X and Y. d. Reject Projects X and Y.Gemilang Berhad is considering which of two mutually exclusive projects it should undertake as its investment in the month of February 2019. The finance director thinks that the project with the higher Net Present Value (NPV) should be chosen whereas the managing director thinks that the one with the shorter payback period should be taken. As a management accountant, you are given with the followings projected profit: Project Initial cost AA (RM) (70,000) 15,000 ZZ (RM) (60,000) Year 1 20,000 Year 2 18,000 25,000 Year 3 20,000 32,000 18,000 Year 4 Year 5 Notes: All cash flows take place at the end of the year apart from the original investment in the project which takes place at the beginning of the project. 1. Project AA machinery is to be disposed of at the end of year 5 with a scrap value of RM10,000. 2. 3. Project ZZ machinery is to be disposed at the end of year 3 with a nil scrap value. 4. Gemilang Berhad's policy is to depreciate its assets on a straight line basis. 5. The…Shaylee Corporation has $2.00 million to invest in new projects. The company's managers have presented a number of possible options that the board must prioritize. Information about the projects follows: Initial investment Present value of future cash flows Required: 1. Is Shaylee able to invest in all of these projects simultaneously? 2-a. Calculate the profitability index for each project. 2-b. What is Shaylee's order of preference based on the profitability index? Complete this question by entering your answers in the tabs below. Req 1 Project A $ 435,000 785,000 Req 2A and 2B Is Shaylee able to invest in all of these projects simultaneously? Is Shaylee able to invest in all of these projects simultaneously? Project C $ 740,000 1,220,000 Project D $ 965,000 1,580,000
