Adventure Land Waterparks is considering a project that has the following cash flow and WACC data. Determine the project's NPV and advise management to accept or reject the project.
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- A company is considering three alternative Investment projects with different net cash flows. The present value of net cash flows is calculated using Excel and the results follow. Potential Projects Present value of net cash flows (excluding initial investment) Initial investment Complete this question by entering your answers in the tabs below. a. Compute the net present value of each project. b. If the company accepts all positive net present value projects, which of these will It accept? c. If the company can choose only one project, which will it choose on the basis of net present value? Required A Required B Compute the net present value of each project. Potential Projects Project A Present value of net cash flows Initial investment Net present value Required C Project E Project C $10,685 (10,000)An independent capital investment project requires an initial cash outflow at time 0, followed by cash inflows for times 1 to 3. Without knowing any of the figures involved, how will this project be appraised under NPV and IRR? The project will be rejected under NPV, but will be acceptable under IRR The NPV decision will be the same as the IRR decision (i.e. accept or reject the project) The project will be acceptable under NPV, but rejected under IRR The NPV decision will be the opposite of the IRR decision (i.e accept or reject the project)Project Appraisal and Financing. We have studied the subject under the following headings . Please prepare a flowchart or a table where the features get highlighted. The purpose is to establish that you have understood the concepts in a broad manner. Selection of Project Time Value of Money Investment Criteria Project cash flows Project Risk Analysis Financing of Project
- According to the Blank______ principle, once the incremental cash flows from a project have been identified, the project can be viewed as a minifirm with its own future revenues and costs, its own assets, and its own cash flows. Multiple choice question. stand-alone walk-alone stand-and-deliver stand-withAccording to the stand-alone principle, the evaluation of a project is based on the project’s Blank______ cash flows. Multiple choice question. incremental standard past totalhe IRR evaluation method assumes that cash flows from the project are reinvested at the same rate equal to the IRR. However, in reality the reinvested cash flows may not necessarily generate a return equal to the IRR. Thus, the modified IRR approach makes a more reasonable assumption other than the project’s IRR. Consider the following situation: Green Caterpillar Garden Supplies Inc. is analyzing a project that requires an initial investment of $3,000,000. The project’s expected cash flows are: Year Cash Flow Year 1 $275,000 Year 2 –150,000 Year 3 475,000 Year 4 400,000 Green Caterpillar Garden Supplies Inc.’s WACC is 8%, and the project has the same risk as the firm’s average project. Calculate this project’s modified internal rate of return (MIRR): 15.88% 14.21% 18.39% -20.35% If Green Caterpillar Garden Supplies Inc.’s managers select projects based on the MIRR criterion, they should this independent project.…
- Which of the following is an advantage of using the payback period method for project selection? The payback period method considers the time value of money The payback period method considers accounting income The payback period method shows when funds will be available for reinvestment The payback period method ignores the time value of moneyi. Whether profitable project or non-profit project the time value of money is important consideration among project planners and profesions develop a case of your choice demonstrating future value and present value computations to validate this statement ii. Define the following terms a) Cost benefit analysis b) Time value of money c) Capital d) Multiple rate of return e) Institutional appraisalThe use of natural resources in an economic activity involves setting up a project forharvesting (i.e. extracting) these resources. For the project to be viable, both economic andfinancial indicators - such as net present value (NPV) and internal rate of return (IRR)considering time value of money - are employed. a) Briefly explain the concept of "time value of money". b) Moreover, explain how you will use NPV and IRR to determine the viability of a project.
- The IRR evaluation method assumes that cash flows from the project are reinvested at the same rate equal to the IRR. However, in reality the reinvested cash flows may not necessarily generate a return equal to the IRR. Thus, the modified IRR approach makes a more reasonable assumption other than the project's IRR. Consider the following situation: Celestial Crane Cosmetics is analyzing a project that requires an initial investment of $2,750,000. The project's expected cash flows are: Year Year 1 Year 2 Year 3 Year 4 Celestial Crane Cosmetics's WACC is 7%, and the project has the same risk as the firm's average project. Calculate this project's modified internal rate of return (MIRR): O 19.45% Cash Flow $350,000 -125,000 500,000 425,000 O -16.52% O24.02% O 20.59% If Celestial Crane Cosmetics's managers select projects based on the MIRR criterion, they should Which of the following statements about the relationship between the IRR and the MIRR is correct? O A typical firm's IRR will be…The use of natural resources in an economic activity involves setting up a project for harvesting (i.e. extracting) these resources. For the project to be viable, both economic and financial indicators - such as net present value (NPV) and internal rate of return (IRR) considering time value of money - are employed. a) Briefly explain the concept of "time value of money". b) Moreover, explain how you will use NPV and IRR to determine the viability of a project.Modified internal rate of return (MIRR) The IRR evaluation method assumes that cash flows from the project are reinvested at the same rate equal to the IRR. However, in reality the reinvested cash flows may not necessarily generate a return equal to the IRR. Thus, the modified IRR approach makes a more reasonable assumption other than the project’s IRR. Consider the following situation: Green Caterpillar Garden Supplies Inc. is analyzing a project that requires an initial investment of $2,225,000. The project’s expected cash flows are: Year Cash Flow Year 1 $350,000 Year 2 –125,000 Year 3 450,000 Year 4 450,000 Green Caterpillar Garden Supplies Inc.’s WACC is 7%, and the project has the same risk as the firm’s average project. Calculate this project’s modified internal rate of return (MIRR): -12.63% 26.46% 30.64% 29.24% If Green Caterpillar Garden Supplies Inc.’s managers select projects based on the MIRR criterion,…
