this is not the answer for this question. the answershould be in an excel form, please show your work inthe excel. please answer this question in the excelformat: An evaluation of your suggested project.(Just use annual cash flows, not quarterly)Project evaluation is capital budgeting. To get therequired return for this, you need the WACC.

Explanation in DetailInput Data: Start by entering all the relevant data points. The initial…

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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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Question 1. A project manager is working on justification of a project. Since very little information is known about the project, some rough estimates have been gathered. Following table is prepared to show the cash inflow and outflow for the following years: Cash In Flow ($) Cash Out Flow ($) Year 900 300 200 2. 400 200 500 300 4 500 200 900 300 a) What is the payback period for this project? b) lf the required rate of return is 20%, is the project mentioned above acceptable? Use NPV. c). Calculate profitability index to determine if the project acceptable. Use 20% interest rate. ) If the required rate of return is accepted as 15%, how this affects the NPV of the project. There is no need for calculation, only make comment. d) NOTE: Show the calculations for the question a, b, and c and fill in the table below. Cash Net Cash In Discounted Year Out cash Cum Cash Flow Flow ($) Cash Flow Flow ($) flow 900 300 200 400 200 3 500 300 500 200 900 300 Discounted Cash Flow (NPV) Net Cash In…
Here, we want to work through a proforma income statement to determine the cash flows from the project. Below are some estimates that the marketing department has determined. Other assumptions necessary for completing the proforma income statement can be found by looking at some of the historical average values in Johnson & Johnson’s financial statements. Suppose Johnson & Johnson (ticker symbol - jnj) has decided to introduce a new heart stent, the Heart Flow. Before they launched the Heart Flow, they analyzed it to see if it would be a desirable investment. The company estimated that it would sell 950,000 Heart Flow’s per year at a price of $75,000 for the next six years. After the first year of sales, the quantity sold will increase by 2% per year for the remaining life of the project.The initial capital outlay is determined to be $15 billion and a $2.0 billion outlay in net working capital (NWC) would also be required. Assume that there is a one-time investment in…
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You are responsible to make a recommendation to the college regarding the upcoming capital projects. Be sure to evaluate each project using payback, NPV, IRR and PI capital budgeting techniques.We do not have enough money to do both projects, please evaluate both and make your recommendation. Both projects will require an original cash investment of $5,000,000. We are considering an ice rink (project A) and a new residential hall with a commuter lounge (Project B). The ice rink will provide revenue of $2,000,000 and the new hall $1,500,000 year one. For the ice rink, cash inflow will be $500,000 years 1 & 2, $600,000 years 3 & 4 and $750,000 each year 5 and beyond. The new hall will have cash inflow of $800,000 years 1, 2, &3 and 500,000 each additional year after that. The college has a payback policy of 5 years and our cost of capital is 10%. Assume each project will have a 10-year useful life.
Martin Weir is evaluating a new project to determine viability for Jonathon's Restaurant's. As part of the new Jonathon's PMO, Marty is responsible for preparing project justifications and he must evaluate the project's cash flows and investment potential. As a first step, Marty developed a table of revenues and investments (see below) that he plans to use in calculating a variety of performance metrics including NPV. Marty understands that a project's discount rate may not be constant throughout the life of the project and he plans to use 0.32 as the initial discount rate, switching to 0.19 beginning in year 4 to more accurately represent the cash costs and imputed risk over time. Assume all cash flows occur at the end of the specified year and calculate all cash flow values and discounted cash flow values to three decimal places. Round discounted values to 3 decimal places before performing subsequent calculations. investment Reveune 13.8 0 14.9 20.3 12.3 27.5 17.6 24.9…
The capital budgeting process is comprehensive and is based on certain assumptions, models, and benchmarks. This process often begins with a project analysis. Generally, the first step in a capital budgeting project analysis-which occurs before any evaluation method is applied-involves estimating the Evaluating cash flows with the NPV method The net present value (NPV) rule is considered one of the most common and preferred criteria that generally lead to good investment decisions. Consider this case: Suppose Cute Camel Woodcraft Company is evaluating a proposed capital budgeting project (project Alpha) that will require an initial investment of $500,000. The project is expected to generate the following net cash flows: Year Year 1 Year 2 Year 3 Year 4 Cash Flow $350,000 500,000 450,000 500,000 Cute Camel Woodcraft Company's weighted average cost of capital is 7%, and project Alpha has the same risk as the firm's average project. Based on the cash flows, what is project Alpha's net…
Q.Because the company’s cash is limited, Andrews thinks the payback method should be used to choose between the capital budgeting projects.a. Calculate the payback period for each of the three projects. Ignore income taxes. Using the payback method, which projects should Andrews choose?
Brunko Hospitality Investment Associates have been approached to evaluate a set of capital budgeting projects. The expected net cash flows along with the initial outlays are represented in the data table below: Year Project 1 Project 2 0 -$250,000 -$250,000 1 $0 $120,000 2 $0 $120,000 3 $0 $120,000 4 $0 $120,000 5 $900,000 $120,000 This firm would like to evaluate the set of capital budgeting projects based on the NPV and IRR. If the minimum required rate of return is 13.00% for both of the projects, which project seems like a better investment to undertake?
**Please solve using Excel and show formulas.** Consider the following projects: Project Cash Flows A -4 5 2.3 0 0 1,000 B -5,600 2,800 2,800 5,800 2,800 2,800 C -7,000 2,800 2,500 0 2,800 2,800 Question: What is the payback period for Project C? Multiple Choice 3.4 3.9 3.2 3.6 3.8
A project does not necessarily have a unique IRR.(Refer to the previous problem for more informationon IRR.) Show that a project with the following cashflows has two IRRs: year 1, 2$20; year 2, $82; year3, 2$60; year 4, $2. (Note: It can be shown that ifthe cash flow of a project changes sign only once, theproject is guaranteed to have a unique IRR.)
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All parts are under one questions and per your policy can be answered. 3. Understanding the IRR and NPV The net present value (NPV) and internal rate of return (IRR) methods of investment analysis are interrelated and are sometimes used together to make capital budgeting decisions. Consider the case of Green Caterpillar Garden Supplies Inc.: Last Tuesday, Green Caterpillar Garden Supplies Inc. lost a portion of its planning and financial data when both its main and its backup servers crashed. The company’s CFO remembers that the internal rate of return (IRR) of Project Gamma is 13.2%, but he can’t recall how much Green Caterpillar originally invested in the project nor the project’s net present value (NPV). However, he found a note that detailed the annual net cash flows expected to be generated by Project Gamma. They are: Year Cash Flow Year 1 $2,400,000 Year 2 $4,500,000 Year 3 $4,500,000 Year 4 $4,500,000 The CFO has asked you to compute Project…

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