Project (Capital Budgeting Techniques) Use an Excel spreadsheet to perform the calculations. Be sure to show all the necessary steps involved in the calculation. Attach both the Excel spreadsheet and the Word document for this project. Your division is considering two investment projects, each of which requires an up-front expenditure of $30 million. You estimate that the cost of capital is 8 % and that the investments will produce the following after-tax cash flows (in millions of dollars): Year Project A Project B 1 5 25 2 15 15 3 20 10 4 25 8 What is the payback period? What are its advantages and disadvantages? What is the payback period for each project? Calculate the NPV and IRR of the two projects. If the two projects are independent and the cost of capital is 8 %, which project or projects should the firm undertake? Briefly discuss merits and demerits of NPV rule for decision making. If the two projects are mutually exclusive and the cost of capital is 8%, which project should the firm choose? If the two projects are mutually exclusive and the cost of capital is 10%, which project should the firm select? What is the crossover rate? If the cost of capital is 10%, what is the modified IRR (MIRR) of each project?
Project (Capital Budgeting Techniques) Use an Excel spreadsheet to perform the calculations. Be sure to show all the necessary steps involved in the calculation. Attach both the Excel spreadsheet and the Word document for this project. Your division is considering two investment projects, each of which requires an up-front expenditure of $30 million. You estimate that the cost of capital is 8 % and that the investments will produce the following after-tax cash flows (in millions of dollars): Year Project A Project B 1 5 25 2 15 15 3 20 10 4 25 8 What is the payback period? What are its advantages and disadvantages? What is the payback period for each project? Calculate the NPV and IRR of the two projects. If the two projects are independent and the cost of capital is 8 %, which project or projects should the firm undertake? Briefly discuss merits and demerits of NPV rule for decision making. If the two projects are mutually exclusive and the cost of capital is 8%, which project should the firm choose? If the two projects are mutually exclusive and the cost of capital is 10%, which project should the firm select? What is the crossover rate? If the cost of capital is 10%, what is the modified IRR (MIRR) of each project?
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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Project (Capital Budgeting Techniques)
Use an Excel spreadsheet to perform the calculations. Be sure to show all the necessary steps involved in the calculation. Attach both the Excel spreadsheet and the Word document for this project.
Your division is considering two investment projects, each of which requires an up-front expenditure of $30 million. You estimate that the cost of capital is 8 % and that the investments will produce the following after-tax cash flows (in millions of dollars):
Year
Project A
Project B
1
5
25
2
15
15
3
20
10
4
25
8
What is the payback period? What are its advantages and disadvantages? What is the payback period for each project?
Calculate the NPV and IRR of the two projects. If the two projects are independent and the cost of capital is 8 %, which project or projects should the firm undertake? Briefly discuss merits and demerits of NPV rule for decision making.
If the two projects are mutually exclusive and the cost of capital is 8%, which project should the firm choose?
If the two projects are mutually exclusive and the cost of capital is 10%, which project should the firm select?
What is the crossover rate?
If the cost of capital is 10%, what is the modified IRR (MIRR) of each project?
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