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:012345Project MProject N-$12,000 $4,000 $4,000 $4,000 $4,000 $4,000-$36,000 $11,200 $11,200 $11,200 $11,200 $11,200

Step 1: We 've to calculate the net present value (NPV) for both projects, Project M and Project…

Answered: A firm with a 14% WACC is evaluating…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Cash PaybackAnderson Company must evaluate two capital expenditure proposals. Anderson's hurdle rate is 12%. Data for the two proposals follow. Proposal X Proposal Y Required investment $360,000 $360,000 Annual after-tax cash inflows 80,400 After-tax cash inflows at the end of years 3, 6, 9, and 12 188,000 Life of project 12 years 12 years What is the cash payback period for Proposal X? For Proposal Y? Hint: For Proposal Y, in what year (3, 6, 9 or 12) will the full original investment be recovered? Round Proposal X answer to one decimal place, if applicable. Proposal X Answer years Proposal Y Answer years
Romanos Construction is analyzing its capital expenditure proposals for the purchase of equipment in the coming year. The capital budget is limited to $5,000,000 for the year. Laura Berenstein, staff analyst at Romanos, is preparing an analysis of the three projects under consideration by Chester Romanos, the company's owner. Data Table A B C D 1 Project A Project B Project C 2 Projected cash outflow 3 Net initial investment $3,000,000 $2,100,000 $3,000,000 4 Projected cash inflows 5 Year 1 $1,200,000 $1,200,000 $1,700,000 6 Year 2 1,200,000 600,000 1,700,000 7 Year 3 1,200,000 500,000 200,000 8 Year 4 1,200,000 100,000 9 Required rate of return 10% 10% 10% 1. Because the company's cash is limited, Romanos thinks the payback method should be used to choose between the capital budgeting projects. a. What are the…
Halls Construction is analyzing its capital expenditure proposals for the purchase of equipment in the coming year. The capital budget is limited to $5,000,000 for the year. Laura Bentley, staff analyst at Halls, is preparing an analysis of the three projects under consideration by Caden Halls, the company's owner. Data Table A B C D 1 Project A Project B Project C 2 Projected cash outflow 3 Net initial investment $3,000,000 $2,100,000 $3,000,000 4 Projected cash inflows 5 Year 1 $1,200,000 $1,200,000 $1,700,000 6 Year 2 1,200,000 600,000 1,700,000 7 Year 3 1,200,000 500,000 200,000 8 Year 4 1,200,000 100,000 9 Required rate of return 6% 6% 6 1.. Calculate the payback period for each of the three projects. Ignore income taxes. Using the payback method, which projects should Halls choose?. Ignore income taxes. (Round your answers to…
A firm with a 13% WACC is evaluating two projects for this year's capital budget. After-tax cash flows, including depreciation, are as follows: 0 1 + 2 + -Select- % Project M -$6,000 $2,000 $2,000 $2,000 $2,000 $2,000 Project N -$18,000 $5,600 $5,600 $5,600 $5,600 $5,600 a. Calculate NPV for each project. Do not round intermediate calculations. Round your answers to the nearest cent. Project M: $ Project N: $ Calculate IRR for each project. Do not round intermediate calculations. Round your answers to two decimal places. Project M: Project N: Calculate MIRR for each project. Do not round intermediate calculations. Round your answers to two decimal places. Project M: Project N: Calculate payback for each project. Do not round intermediate calculations. Round your answers to two decimal places. Project M: Project N: years Calculate discounted payback for each project. Do not round intermediate calculations. Round your answers to two decimal places. Project M: Project N: years b. Assuming…
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he cash flows associated with a public works project in Buffalo, New York, are shown. Use the modified B/C ratio at a discount rate of 5% per year to determine the economic justification. First cost, $ 30,000,000 AW of benefits, $/year 7,700,000 AW of disbenefits, $/year 1,700,000 M&O costs, $/year 1,525,000 Life of project, years 30 The modified B/C ratio is . The project is economically (Click to select) justified not justified .
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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: 1 2 3 4 5 Project M -$15,000 $5,000 $5,000 $5,000 $5,000 $5,000 Project N -$45,000 $14,000 $14,000 $14,000 $14,000 $14,000 a. Calculate NPV for each project. Do not round intermediate calculations. Round your answers to the nearest cent. Project M: $ Project N: $ Calculate IRR for each project. Do not round intermediate calculations. Round your answers to two decimal places. Project M: Project N: % % Calculate MIRR for each project. Do not round intermediate calculations. Round your answers to two decimal places. Project M: % Project N: % Calculate payback for each project. Do not round intermediate calculations. Round your answers to two decimal places. Project M: Project N: years years Calculate discounted payback for each project. Do not round intermediate calculations. Round your answers to two decimal places. Project M: Project N: years…
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A firm with a 13% WACC is evaluating two projects for this year's capital budget. After-tax cash flows, including yearly depreciation, are as follows: Project M -$6,000 $2,000 $2,000 $2,000 $2,000 $2,000 Project N -$18,000 $5,600 $5,600 $5,600 $5,600 $5,600 Calculate discounted payback for each project. Do not round intermediate calculations. Round your answers to two decimal places. Project M: years Project N: years
You are evaluating five different investments, all of which involve an upfront outlay of cash. Each investment will provide a single cash payment back to you in the future. Details of each investment appears here:. Calculate the IRR of each investment. State your answer to the nearest basis point (i.e., the nearest 1/100th of 1%, such as 3.76%). The yield for investment A is %. (Round to two decimal places.) Initial Future Investment Investment Value Im A $1,900 $4,029 B $9,600 $13,121 C $500 D $3,200 E $5,900 Data table $1,759 $4,139 $9,079 End of Year 11 9 18 3 12 I X
Please help me solve (especially payback / discount payback)

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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: 0 1 2 3 4 5 Project M Project N -$12,000 $4,000 $4,000 $4,000 $4,000 $4,000 -$36,000 $11,200 $11,200 $11,200 $11,200 $11,200