NPVS, IRRS, and MIRRS for Independent ProjectsEdelman Engineering is considering including two pieces of equipment, a truck and an overhead pulley system, in this year's capital budget. The projects are independent. The cash outlay for the truck is $17,100, and that for thepulley system is $22,430. The firm's cost of capital is 14%. After-tax cash flows, including depreciation, are as follows:YearTruckPulley1$5,100$7,50025,1007,50035,1007,50045,1007,5005,1007,500Calculate the IRR, the NPV, and the MIRR for each project, and indicate the correct accept/reject decision for each. Do not round intermediate calculations. Round the monetary values to the nearest dollar and percentage values totwo decimal places. Use a minus sign to enter negative values, if any.TruckPulleyValueDecisionValueDecisionIRR%Accept v%Accept v2$$NPV-Select- V|-Select- vMIRR%-Select-%-Select- v

Capital Budgeting Techniques are used to choose the most profitable investment alternative. Based on…

NPVS, IRRS, and MIRRS for Independent Projects Edelman Engineering is considering including two pieces of equipment, a truck and an overhead pulley system, in this year's capital budget. The projects are independent. The cash outlay for the truck is $17,100, and that for the pulley system is $22,430. The firm's cost of capital is 14%. After-tax cash flows, including depreciation, are as follows: Year Truck Pulley $5,100 $7,500 5,100 7,500 5,100 7,500 5,100 7,500 5 5,100 7,500 Calculate the IRR, the NPV, and the MIRR for each project, and indicate the correct accept/reject decision for each. Do not round intermediate calculations. Round the monetary values to the nearest dollar and percentage values to two decimal places. Use a minus sign to enter negative values, if any. Truck Pulley Value Decision Value Decision Accept v Accept v IRR % % NPV -Select- v -Select- v MIRR % -Select- v % -Select- v

NPVS, IRRS, and MIRRS for Independent Projects Edelman Engineering is considering including two pieces of equipment, a truck and an overhead pulley system, in this year's capital budget. The projects are independent. The cash outlay for the truck is $17,100, and that for the pulley system is $22,430. The firm's cost of capital is 14%. After-tax cash flows, including depreciation, are as follows: Year Truck Pulley $5,100 $7,500 5,100 7,500 5,100 7,500 5,100 7,500 5 5,100 7,500 Calculate the IRR, the NPV, and the MIRR for each project, and indicate the correct accept/reject decision for each. Do not round intermediate calculations. Round the monetary values to the nearest dollar and percentage values to two decimal places. Use a minus sign to enter negative values, if any. Truck Pulley Value Decision Value Decision Accept v Accept v IRR % % NPV -Select- v -Select- v MIRR % -Select- v % -Select- v

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
Nicholson Roofing Materials, Inc., is considering two mutually exclusive projects, that both cost $100,000. The company's board of directors has set a 4-year payback requirement the cost of capital is 10%. The project cash flows are shown in the following table: Cash flows (CF Subscript t) Year Project A Project B 1 $30,000 $85,000 2 $30,000 $50,000 3 $30,000 $10,000 4 $30,000 $10,000 5 $30,000 $10,000 6 $30,000 $10,000 a. Calculate the payback period for each project. Rank the projects by payback period. b. Calculate the NPV of each project. Rank the project by NPV. c. Calculate the IRR of each project. Rank the project by IRR. d. Make a recommendation.
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…
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 .
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 $540,000 $540,000 Annual after-tax cash inflows 54,000 After-tax cash inflows at the end of years 3, 6, 9, and 12 136,000 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
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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…
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
BHT Company evaluates a project for a potential inclusion in its capital budget. In the first year of the project, it expects incremental net income of $33 million, depreciation expenses of $8 million and an increase in net working capital of $2 million. What is the estimated incremental free cash flow in the first year of the project? $29 mil $39 mil $42 mil $19 mil $36 mil $22 mil
Military Jargon Industries Inc. is considering allocating a limited amount of capital investment funds among four proposals. The amount of proposed investment, estimated income from operations, and net cash flow for each proposal are as follows: ProjectName Bravo Tango Uniform Victor Investment $880,008 Investment $2,770,865 Investment $1,566,680 Investment $918,346 Year Income fromOperations Net Cash Flows Income fromOperations Net Cash Flows Income fromOperations Net Cash Flows Income fromOperations Net Cash Flows 1 $96,000 $240,000 $294,500 $950,000 $176,000 $400,000 $108,000 $380,000 2 96,500 240,000 294,775 950,000 176,000 400,000 108,000 380,000 3 97,000 240,000 295,050 950,000 176,000 400,000 108,000 380,000 4 97,500 240,000 295,325 950,000 176,000 400,000 108,000 380,000 5 98,000 240,000 295,600 950,000 176,000 400,000 108,000 380,000 Total $485,000 $1,200,000 $1,475,250 $4,750,000 $880,000 $2,000,000 $540,000 $1,900,000 Present Value of $1 at…
Pharoah Manufacturing Co. is evaluating two projects. The company uses payback criteria of three years or less. Project A has a cost of $901,000, and project B's cost is $1,268,100. Cash flows from both projects are given in the following table. Year Project A $86,212 1 2 3 4 313,562 427,594 285,552 Project B $586,212 413,277 231,199 What are their discounted payback periods? (Round answers to 2 decimal places, e.g. 15.25. If discounted payback period exceeds life of the project, enter 0.00 for the answer.) Discounted payback period of project A Pharoah should choose Discounted payback period of project B Which will be accepted with a discount rate of 8 percent?
Berwick's Bike shops initial capital cost (not including working capital) is 750,000, expected after - tax operating cash flow is $225,000 per year for five years, and the recovery of capital assets after five years is §75,000. There is also a $100,000 increase in working capital at the beginning of the project that is recovered in whole atthe end of the life of the project in year 5. Ifthis project has a required rate of return of 15%, what is its IRR? Use a financial calculator to determine your answer

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