NPV unequal lives. Singing Fish Fine Foods has $1,820,000 for capital investments this year and isconsidering two potential projects for the funds. Project I is updating the store's deli section foradditional food service. The estimated after-tax cash flow of this project is $610,000 per year for thenext five years. Project 2 is updating the store's wine section. The estimated annual after-tax cash flowfor this project is $500,000 for the next six years. If the appropriate discount rate for the deli expansionis 9.5% and the appropriate discount rate for the wine section is 9.0%, use the NPV to determine whichproject Singing Fish should choose for the store. Adjust the NPV for unequal lives with the equivalentannual annuity. Does the decision change? What is the adjusted NPV equivalent annual annuity of thewine section?

The net present worth of an investment will be used by an investor to assess the investment's…

Answered: NPV unequal lives. Singing Fish Fine…

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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can you show the formula in excel. Benford Inc. is planning to open a new sporting goods store in a suburban mall. Benford will lease the needed space in the mall. Equipment and fixtures for the store will cost $200,000 and be depreciated over a five-year period on a straight-line basis to $0. The new store will require Benford to increase its net working capital by $200,000 at time 0. First-year sales are expected to be $1 million and to increase at an annual rate of 8 percent over the expected 10-year life of the store. Operating expenses (including lease payments and excluding depreciation) are projected to$700,000 during the first year and increase at a 7 percent annual rate. The salvage value of the store’s equipment and fixtures is anticipated to be $10,000 at the end of 10 years. Benford’s marginal tax rate is 40 percent. a. Compute the net investment required for Benford. b. Compute the annual net cash flows for the 10-year projected life of the store. c. Compute the…
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MIRR unequal lives. Singing Fish Fine Foods has $2,000,000 for capital investments this year and is considering two potential projects for the funds. Project 1 is updating the store's deli section for additional food service. The estimated after-tax cash flow of this project is $610,000 per year for the next five years. Project 2 is updating the store's wine section. The estimated annual after-tax cash flow for this project is $510,000 for the next six years. The appropriate discount rate for the deli expansion is 9.3% and the appropriate discount rate for the wine section is 9.0%. What are the MIRRS for the Singing Fish Fine Foods projects? What are the MIRRS when you adjust for unequal lives? Do the MIRR adjusted for unequal lives change the decision based on MIRRS? Hint Take all cash flows to the same ending period as the longest project BOOOD If the appropriate reinvestment rate for the deli expansion is 9.3%, what is the MIRR of the deli expansion? 12.92% (Round to two decimal…
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