Two projects have the following projected cash flows:Project AProject BYearCash FlowCash Flow0-$105,000-$150,0001$30,000$30,0002$45,000$30,0003$30,000$40,0004$15,000$50,0005$44,500$87,000Both projects have a salvage value at the end of year 5 of $20,000Calculate the NPVs and IRRS of each project, if the WACC is 6% and if it is11%. Then answer the questions that follow.You may find it useful to enter your answers in the following table:NPVIRRProject AProject BProject A Project B@6% WACC @ 6% WACC @11% WACC @11% WACCScreenshot 2024-04-...iQ QくNPV & IRRRefer to the NPV & IRR Scenario above. What is the Future Value of ProjectA if the WACC is 11%?48,267○ $64,349$103,818○ $71,701$97,323

Based on the table in the image, the future value of Project A at a WACC of 11% is $103,818.We…

Answered: Two projects have the following…

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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The cash flows and Net salvage value of Project Y is given the following table: Year Cash flows Salvage Value 0 -5,800 5,800 1 2,100 3,000 2 1,400 2,200 3 1,600 1,900 4 1,800 300 Given the cost of capital is 10%, Calculate the NPV for its Economic Life and determine what are its economic life and physical life of Project Y?(Please show your work)
We are analyzing a project and have gathered the following data. Based on this data, what is the average accounting rate of return? The project's assets will be depreciated using straight-line depreciation to a zero book value over the life of the project. Year Cash Flow Net Income 0 $285,000 n/a 1 $83,650 $12,400 2 $92,850 $21,600 3 $94,350 $23,100 4 $93,250 $22,000
Scenario 2: Two mutually exclusive projects (Project A and Project B) are being evaluated. Both projects require an initial investment of $100,000. The expected cash flows for each project are as follows: Project A: Year 1: $40,000 Year 2: $30,000 Year 3: $25,000 Year 4: $15,000 Project B: Year 1: $25,000 Year 2: $35,000 Year 3: $40,000 Year 4: $20,000 The company's cost of capital is 10%. Required: 3. Calculate the NPV for both Project A and Project B using the provided cost of capital. (Round to the nearest whole dollar) 4. Considering only NPV, which project would you recommend, and why? Bonus Challenge: (This question requires a financial calculator or spreadsheet with IRR function) 5. Calculate the IRR for Project A and B. (Note: You can mention that a financial calculator or spreadsheet is required for this calculation) 6. Considering only 1 project to be prioritized, which project will you recommend?
All information is provided
The following information relates to three possible capital expenditure projects. Because of capital rationing only one project can be accepted. Project A Project B Project C Initial Cost 240,000.00 260,000.00 200,000.00 Expected life 5 5 4 Scrap value expected 10,000.00 15,000.00 10,000.00 Expected Cash Inflows: End Year 1 85,000.00 95,000.00 45,000.00 End Year 2 70,000.00 70,000.00 65,000.00 End Year 3 65,000.00 55,000.00 95,000.00 End Year 4 60,000.00 50,000.00 100,000.00 End Year 5 50,000.00 50,000.00 The company estimates cost of capital is 18%. The table below shows the present value of $1 at 14%, 18% and 22%. Periods 14% 18% 22% 1 0.877 0.847 0.820 2 0.769 0.718 0.672 3 0.675 0.609 0.551 4 0.592 0.516 0.451 5 0.519 0.437 0.370 6 0.456 0.370 0.303 Required: Calculate:(b) The accounting rate of return for each…
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Required information [The following information applies to the questions displayed below.] Project Y requires a $331,500 investment for new machinery with a five-year life and no salvage value. The project yields the following annual results. Cash flows occur evenly within each year. (PV of $1. EV of $1. PVA of $1. and FVA of $1) Note: Use appropriate factor(s) from the tables provided. Annual Amounts Sales of new product Expenses Project Y Materials, labor, and overhead (except depreciation) Depreciation-Machinery Selling, general, and administrative expenses Income 3. Compute Project Y's accounting rate of return. Numerator: Accounting Rate of Return Denominator: Project Y $ 400,000 179,200 66,300 29,000 $ 125,500 Accounting Rate of Return
Information on four investment proposals is given below: Investment Proposal A B C D Investment required $ (330,000) $ (40,000) $ (190,000) $ (2,380,000) Present value of cash inflows 480,000 56,500 286,700 3,178,500 Net present value $ 150,000 $ 16,500 $ 96,700 $ 798,500 Life of the project 5 years 7 years 6 years 6 years Required: 1. Compute the profitability index for each investment proposal. (Round your answers to 2 decimal places.) 2. Rank the proposals in terms of preference.
Calculate the IRR of a project requiring an investment outlay of $ 10,000 resulting in cash inflows of $2,000 at the end of Year 1, $5,000 at the end of Year 2, and $8,000 at the end of year 3. a. 19.79% b. 18.79% c. 20.79% d. 22.79%
Given the following, calculate the project's cash flows, NPV, and IRR. Initial investment $325,000 Expected life is 5 years First Year Revenues: 145,000 First-Year Expenses: $65,000 • Growth for revenue and expenses: 4.5 percent per year Straight Line Depreciation over 5 years Salvage Value: $50,000 One-time net working capital investment of $10,000 is required at the start of the project and will be recovered at project end The tax rate is 34 percent The risk-free rate is 4 percent Beta is 1.1 • The expected market return is 8 percent Answer the following: ● ● ● ● ● ● ● ● ● What are the cash flows for each year? What is the NPV? What is the IRR?
A project will produce an operating cash flow of $18,000 a year for 8 years. The initial fixed asset investment in the project will be $75,000. The net aftertax salvage value is estimated at $11,250 and will be received during the last year of the project's life. What is the IRR? A. 18.57% B. 16.71% C. 17.08% D. 18.94% E. 17.83%
nformation on four investment proposals is given below: Investment Proposal A B C D Investment required $ (900,000) $ (170,000) $ (90,000) $ (1,430,000) Present value of cash inflows 1,263,600 233,400 136,500 1,908,300 Net present value $ 363,600 $ 63,400 $ 46,500 $ 478,300 Life of the project 5 years 7 years 6 years 6 years Required: 1. Compute the profitability index for each investment proposal. (Round your answers to 2 decimal places.) 2. Rank the proposals in terms of preference.

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