QUANTITATIVE. Fill in the following statements based on the below projectfinancial analysis.a. The Net Present Value isb. The Return on Investment isc. The project will break even (make back its costs) in Yeard. This projectCreated by: Praju ManageskiNote: Change the inputs, such as discount rate, number of years, costs, and benefits. Be sure toDiscount rateCostsDiscount factorDiscounted costsBenefitsDiscount factorDiscounted benefitsprofitable because the ROI and NPV are bothFinancial Analysis for Project GGUAssume the project is completed in Year 0Discounted benefits -costsCumulative benefits - costsROI5%10,0001.0010,00001.000(10,000)(10,000)16%00.952,0000.951,905Year00.9150000.914,5351,9054,535(8,095) (3,560)00.86.60000.865,1835,1831,62310,00011,6231,623NPV

Computation of NPV & ROI:a) NPV = 1,623b) ROI = 16%Formula reference for above table:

QUANTITATIVE. Fill in the following statements based on the below project financial analysis. a. The Net Present Value is b. The Return on Investment is c. The project will break even (make back its costs) in Year d. This project Created by: Praju Manageski Note: Change the inputs, such as discount rate, number of years, costs, and benefits. Be sure to Discount rate Benefits Discount factor Discounted benefits profitable because the ROI and NPV are both Financial Analysis for Project GGU 5% Assume the project is completed in Year 0 Costs Discount factor Discounted costs Discounted benefits - costs Cumulative benefits -costs ROI 10,000 1.00 10,000 0 1.00 0 (10,000) (10,000) 16% 0.95 2,000 0.95 1,905 Year 20 2 0.91 5000 0.91 4,535 1,905 4,535 (8,095) (3,560) 3 Total 0 0.86 6000 0.86 5,183 5,183 1,623 10,000 11,623 1,623 NPV

QUANTITATIVE. Fill in the following statements based on the below project financial analysis. a. The Net Present Value is b. The Return on Investment is c. The project will break even (make back its costs) in Year d. This project Created by: Praju Manageski Note: Change the inputs, such as discount rate, number of years, costs, and benefits. Be sure to Discount rate Benefits Discount factor Discounted benefits profitable because the ROI and NPV are both Financial Analysis for Project GGU 5% Assume the project is completed in Year 0 Costs Discount factor Discounted costs Discounted benefits - costs Cumulative benefits -costs ROI 10,000 1.00 10,000 0 1.00 0 (10,000) (10,000) 16% 0.95 2,000 0.95 1,905 Year 20 2 0.91 5000 0.91 4,535 1,905 4,535 (8,095) (3,560) 3 Total 0 0.86 6000 0.86 5,183 5,183 1,623 10,000 11,623 1,623 NPV

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Using image: a-1. What is the payback period for each project a-2. If you apply the payback criterion, which investment will you choose? b-1. What is the discounted payback period for each project? b-2. If you apply the discounted payback criterion, which investment will you choose? c-1. What is the NPV for each project? c-2. If you apply the NPV criterion, which investment will you choose? d-1. What is the IRR for each project? d-2. If you apply the IRR criterion, which investment will you choose? e-1. What is the profitability index for each project? e-2. If you apply the profitability index criterion, which investment will you choose? f. Based on your answers in (a) through (e), which project will you finally choose?
Suppose that your organization is deciding which of four projects to bid on, as summarized in the following table. Assume that all up-front investments are not recovered, so they are shown as negative profits. Draw a diagram and calculate the EMV for each project. Write a few paragraphs explaining which projects you would bid on. Be sure to use the EMV information and your personal risk tolerance to justify your answer.
4. 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 $500,000. The project’s expected cash flows are: Year Cash Flow Year 1 $300,000 Year 2 –100,000 Year 3 450,000 Year 4 450,000 Green Caterpillar Garden Supplies Inc.’s WACC is 9%, and the project has the same risk as the firm’s average project. Calculate this project’s modified internal rate of return (MIRR): 22.81% 18.25% 21.67% 20.53%
Mike Riskless is considering two projects. He has estimated the IRR for each under three possible scenarios and assigned probabilities of occurrence to each scenario. State of Economy Probability Estimated BTIRR Investment I Estimated BTIRR Investment II Optimistic 0.20 0.15 0.20 Most likely 0.60 0.10 0.15 Pessimistic 0.20 0.05 0.05 1.00 Riskless is aware that the pattern of returns for Investment II looks very attractive relative to Investment I; however, he believes that Investment II could be more risky than Investment I. He would like to compare the two investments considering both the risk and return on each. Required: a. Compute BTIRR under each of the three possible scenarios. b. Compute variance and standard deviation of the IRRs.
The internal rate of return (IRR) is the: Multiple Choice discount rate that results in a zero net present value for the project. discount rate that causes a project's aftertax income to equal zero.
Basic NPV methods tell us that the value of a project today is NPV0. Time value of money issues also lead us to believe that if we choose not to do the project that it will be worth NPV1 one period from now, such that NPV0 > NPV1. Why then do we see some firms choosing to defer taking on a project. Be complete and thorough in your answer.
Please solve and provide the steps for the problem provided below
Which of the following would cause a project to have a lower net present value, thereby making the project less appealing? A. The discount rate increases B. The cash flows are extended over a longer period of time. C. The investment cost decreases without affecting the expected income and life of the project. d. The cash flows are accelerated and the project life is correspondingly shortened.
Two investment projects are under analysis and, due to budget constraints, only one of them can be selected. The investor should select the project: a. Based on absolute metric of value b. With higher internal rate of returnc. With lower discounted payback period
4. 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: Grey Fox Aviation Company is analyzing a project that requires an initial investment of $450,000. The project’s expected cash flows are: Year Cash Flow Year 1 $300,000 Year 2 –175,000 Year 3 475,000 Year 4 450,000 Grey Fox Aviation Company’s WACC is 10%, and the project has the same risk as the firm’s average project. Calculate this project’s modified internal rate of return (MIRR): 26.73% 27.89% 20.92% 23.24% If Grey Fox Aviation Company’s managers select projects based on the MIRR criterion, they shouldreject this independent…
Why is payback often used as the sole method of analyzing a proposed small project? Payback is the most desirable of the various financial methods of analysis. The benefits of payback analysis usually outweigh the costs of the analysis. Payback considers the time value of money. All relevant cash flows are included in the payback analysis. Payback is focused on the long-term impact of a project. OOOO
Profitability index. Given the discount rate and the future cash flow of each project listed in the following table, . use the Pl to determine which projects the company should accept. What is the Pl of project A? i Data Table (Round to two decimal places.) (Click on the following icon o in order to copy its contents into a spreadsheet.) Cash Flow Project A -%241,900,000 $150,000 $350,000 Project B Year 0 $2,300,000 $1,150,000 $950 000 $750,000 $550,000 Year 1 Year 2 Year 3 $550,000 Year 4 $750,000 $950,000 4% Year 5 $350.000 Discount rate 18% Print Done