FNCE 623 Financial Management Individual assignment Belgravia Petroleum Inc. is trying to evaluate a generationproject with the following cash flows: Year Cashflow 0-$300,000,000 1 $63,000,000 2 $85,000,000 3 - $50,000,000 4$145,000,000 5 $175,000,000 6 - $50,000,000 7 $70,000,000 8 $72,000,000 Construct a spreadsheet and calculatethe following (the required rate of return is 12 %): Payback period Discounted payback period Internal rate of return (IRR) Modified IRR The discounting approach The reinvestment approach The combination approach Net present value (NPV) Based on your analysis, should the company take the project? Why? IMPORTANT: Use MS Excel functions (PV, FV, NPV, and IRR) in your spreadsheet.

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Answered: FNCE 623 - Financial Management…

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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Aa 53.
A3 44 Given the following project information, calculate the after-tax operating cash flow (ATOCF) using the four approaches of calculating operating cash flow. Project cost = $950,000 Project life = five years Projected number of units sold per year = 10,000 Projected price per unit = $200 Projected variable cost per unit = 150 Fixed costs per year = $150,000 Required rate of return = 15% Marginal tax rate = 35% Depreciation = Straight-line to zero over five years (ignore half-year rule)
A company is analyzing two mutually exclusive projects, S and L, with the following cash flows: 0 1 2 3 4 Project S -$1,000 $875.31 $260 $15 $5 Project L -$1,000 $5 $240 $400 $813.71 The company's WACC is 9.5%. What is the IRR of the better project? (Hint: The better project may or may not be the one with the higher IRR.) Round your answer to two decimal places. %
ssignment Question : XZ Company is medium sized metal fabricator that is currently contemplating two projects: Project A require an initial investment of $ 50,000, Project B require an initial investment of $ 55,000. Assume the NZ Company has a 10% cost of capital and the relevant cash flows for the two projects are presented in the table below: Project Project A Project B Initial Investment 50,000 55,000 Year Operating Cash Flow 1 18000 33000 2 18000 16000 3 18000 14000 4 18000 14000 5 18000 14000 Require: Calculate the NPV for Project A and B? Based on your NPV findings in section (a) which project will you recommend for NZ Company? Based on your answer in section (b) justify your recommendation?
Project X
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21 Bi-Lo Traders is considering a project that will produce sales of $34,450 and have costs of $20,300. Taxes will be $3.500 and the depreciation expense will be $1,97% An intal cash ouday of $1,000 is required for networking capital. What is the projects operating cash flow? $6.925 $8.900 $8.575 $10.550 Next
# 28 Wau Sdn. Bhd, is evaluating two (2) mutually exclusive projects. The cash flows are as follows Year Year 2 4 5 Project AA (500,000) 50,000 150,000 250,000 200,000 100,000 Project BB (600,000) 200,000 200,000 200,000 200,000 200,000 How long does it take to recover the initial cost of investment for each project? Answer O Project AA = 3 years & Project BB 3.25 years %3D Project AA = 2.5 years & Project BB = 3 years %3D %3D 3.
Calculate IRR of projects S and L, IRRS & IRRL IRRS IRRL UF Company is considering Projects S and L, whose cash flows are shown below. These projects are mutually exclusive, equally risky, and are not repeatable. WACC: 7.75% Year 0 1 2 3 4 CFS ($1,050) $700 $625 CFL ($1,050) $370 $370 $360 $360
Belgravia Petroleum Inc. is trying to evaluate a generation project with the following cash flows: Year Cashflow 0 -$300,000,000 1 $63,000,000 2 $85,000,000 3 -$50,000,000 4 $145,000,000 5 $175,000,000 6 -$50,000,000 7 $70,000,000 8 $72,000,000 Construct a spreadsheet and calculate the following (the required rate of return is 12%): Payback period Discounted payback period Internal rate of return (IRR) Modified IRR The discounting approach The reinvestment approach The combination approach Net present value (NPV) Based on your analysis, should the company take the project? Why?
A company is analyzing two mutually exclusive projects, S and L, with the following cash flows: 0 1 2 3 4 Project S -$1,000 $875.58 $260 $10 $15 Project L -$1,000 $0 $250 $380 $843.71 The company's WACC is 10.0%. What is the IRR of the better project? (Hint: The better project may or may not be the one with the higher IRR.) Round your answer to two decimal places.

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