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A: NPV is the present value of future cashflows
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A: To open the "NPV function" window - MS-Excel --> Formulas --> Financials --> NPV.
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A:
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A: NPV (Net Present Value) is one of the important techniques of capital budgeting decisions that aims…
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A: NOTE: Since you have posted a question with multiple sub-parts, we will solve first three sub-parts…
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A: Given information: Year Cash Flow 0 -3,024 1 17,172 2 -36,420 3 34,200 4 -12,000
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Q: What is the net present value of a project with the following cash flows if the discount rate is 12…
A: Computation:
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A: Profitability index =Present value of cash flow/initial investment
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A: Formulas:
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A: The PVIFA calculation formula is as follows: PVIFA=1-(1+r)-nr =1-(1+10.20%)-910.20% PVIFA=present…
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A: Given information: Cost of capital is 12% Calculation of Net present value (NPV): Excel workings:
Q: ) Consider the following project: Year Cash Flow 0 – $ 3,024…
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Q: 22
A: The calculation of net present value for project B is shown in the below table:
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A: IRR may be calculated using the following excel formula
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A: The computation of NPV is as follows: Hence, the NPV is $7,403.80
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A: As you have asked a question with several parts, we will solve the first 3 parts as per policy of…
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A: NPV is the sum of present value of future cashflows PV = cashflow/(1+rate)^year
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A: NPV (Net Present Value)NPV is the method of finding the worth of an investment or project by…
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Q: 5
A: Calculation of EAA for project A: Answer: Equivalent annual annuity (EAA) for project A is $20,179
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A: Annual inflow (A) = $20000 Annual outflow (O) = $13000 Tax rate (T) = 33% Let D = Depreciation
Q: of Project million nillion 1 illion 11 illion 10 illion 1C
A: Given:
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A: present value formula: net present value =-initial value+future value1+rn where, r= rate of interest…
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A:
Q: Q2: Consider the net cash flows ($) given below for mutually exclusive projects X and Y. Which…
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A: i = 12% MARR = 15% Cash Flows: Year Cash Flow 0 -450,000 1 -42,500 2 92,800 3 386,000…
Q: Compute the NPV of the project below assuming that the cost of capital is 8%: Year 0 1 2 3 FCF…
A: Formulas:
Q: 25
A: PROJECT B Year Cash flows 0 (300,000.00) 1 150,000.00 2 150,000.00 3…
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- One of the important components of multinational capital budgeting is to analyze the cash flows generated from subsidiary companies. Consider this case: Sacramone Products Co. is a U.S. firm evaluating a project in Australia. You have the following information about the project: • The project requires an investment of AU$1,230,000 today and is expected to generate cash flows of AU$1,200,000 at the end of each of the next two years. • The current exchange rate of the U.S. dollar against the Australian dollar is $0.7877 per Australian dollar (AU$). • The one-year forward exchange rate is $0.8109 / AU$, and the two-year forward exchange rate is $0.8455 / AU$. • The firm’s weighted average cost of capital (WACC) is 9%, and the project is of average risk. What is the dollar-denominated net present value (NPV) of this project? $933,397 $777,831 $738,939 $855,614Suppose that Kittle Co. is a U.S. based MNC that is considering setting up a subsidiary in Singapore. Kittle would like this subsidiary to produce and sell guitars locally in Singapore, and needs assistance with capital budgeting. The duration of this project is four years, with an initial investment of S$20,000,000 (Singapore dollars). Kittle managers have conducted a capital budgeting analysis with the assumption that the exchange rate will be $0.50 over the life of the project. However, Kittle management acknowledges the possibility that the value of the Singapore dollar will fluctuate over time. To that end, Kittle is considering two alternative scenarios: one in which the Singapore dollar is strong relative to the U.S. dollar and one in which the Singapore dollar is weak against the U.S. dollar. The following table shows one section of Kittle's capital budgeting analysis, under the scenario where the Singapore dollar is strong relative to the U.S. dollar. Complete row 22 of the…Suppose that Kittle Co. is a U.S. based MNC that is considering setting up a subsidiary in Singapore. Kittle would like this subsidiary to produce and sell guitars locally in Singapore, and needs assistance with capital budgeting. The duration of this project is four years, with an initial investment of S$20,000,000 (Singapore dollars). Kittle managers have conducted a capital budgeting analysis with the assumption that the exchange rate will be $0.50 over the life of the project. However, Kittle management acknowledges the possibility that the value of the Singapore dollar will fluctuate over time. To that end, Kittle is considering two alternative scenarios: one in which the Singapore dollar is strong relative to the U.S. dollar and one in which the Singapore dollar is weak against the U.S. dollar. The following table shows one section of Kittle's capital budgeting analysis, under the scenario where the Singapore dollar is strong relative to the U.S. dollar. Complete row 22 of the…
- Consider this case: Sebrele Enterprises Inc. is a U.S. firm evaluating a project in Australia. You have the following information about the project: The project requires an investment of AU$915,000 today and is expected to generate cash flows of AU$900,000 at the end of each of the next two years. The current exchange rate of the U.S. dollar against the Australian dollar is $0.7823 per Australian dollar (AUS). The one-year forward exchange rate is $0.8102 / AU$, and the two-year forward exchange rate is $0.8412 / AU$. The firm's weighted average cost of capital (WACC) is 9.5%, and the project is of average risk. What is the dollar-denominated net present value (NPV) of this project? $610,602 $726,908 $581,526 $639,679Consider the following international investment opportunity. It involves a gold mine that can be opened at a cost, then produces a positive cash flow, but then requires environmental clean-up. Year 0: -64,000 Euros Year 1: 160,000 Euros Year 2: -100,000 Euros The current exchange rate is $1.60 = 1 Euro. The inflation rate in the U.S. is 6 percent and in the euro zone 2 percent. The appropriate cost of capital to a U.S. -based firm for a domestic project of this risk is 8 percent. Find the dollar cash flows to compute the dollar - denominated NPV of this project. And also find the euro - zone cost of capital.A consumer product firm is considering making a major investment in China. The investment is expected to cost $5 billion, and the present value (PV) of the expected cash flows on the investment is only $3.5 billion. However, the firm believes that there are substantial expansion opportunities in China. Would that justify investing the $5 billion? Why or why not?
- International Capital Budgeting Using the Foreign Currency Approach. ABC Company is considering a capital project with the cash flows as stated below in Euros. The project is in Euros and must be converted back to USD. The exchange rate is 0.83 Euros. The difference in the nominal rates between the two currencies is 2 percent. The appropriate discount rate for the project is estimated to be 10%, the US cost of capital for the company. What is the NPV of the project in US Dollars? NPV Year Cash Flows in Euro 0 € -2,900,000 1 €1,300,000 2 €1,300,000 3 €1,300,000 Round to the nearest cent and format as "XXX,XXX.XX"A U.S. company is considering a high-technology project in a foreign country. The estimated economic results for the project (after taxes), in the foreign currency (T-marks), is shown in the following table for the seven-year analysis period being used. The company requires an 18% rate of return in U.S. dollars (after taxes) on any investments in this foreign country. a. Should the project be approved, based on a PW analysis in U.S. dollars, if the devaluation of the T-mark, relative to the U.S. dollar, is estimated to average 12% per year and the present exchange rate is 20 T-marks per dollar? b. What is the IRR of the project in T-marks? c. Based on your answer to (b), what is the IRR in U.S. dollars?The South Korean multinational manufacturing firm, Nam Sung Industries, is debating whether to invest in a 2-year project in the United States. The project's expected dollar cash flows consist of an initial investment of $1 million with cash inflows of $700,000 in Year 1 and $600,000 in Year 2. The risk-adjusted cost of capital for this project is 12%. The current exchange rate is 1,055 won per U.S. dollar. Risk-free interest rates in the United States and S. Korea are: % U.S. S. Korea a. If this project were instead undertaken by a similar U.S.-based company with the same risk-adjusted cost of capital, what would be the net present value generated by this project? Do not round intermediate calculations. Round your answer to the nearest dollar. $ What would be the rate of return generated by this project? Do not round intermediate calculations. Round your answer to two decimal places. 1-Year 4.0% 3.0% Rate of return: 2-Year 5.25% 4.25% b. What is the expected forward exchange rate 1…
- Consider the following international investment opportunity. It involves a gold mine that can be opened at a cost, then produces a positive cash flow, but then requires environmental clean-up. Year 0 + -€64,000 Year 1 Year 2 €160,000 -€100,000 The current exchange rate is $1.60 = €1.00. The inflation rate in the U.S. is 6 percent and in the euro zone 2 percent. The appropriate cost of capital to a U.S.-based firm for a domestic project of this risk is 8 percent. Find the euro-zone cost of capital. Write it down in percent with two decimals places.Ch. 31. International Capital Budgeting Using the Foreign Currency Approach. ABC Company is considering a capital project with the cash flows as stated below in Euros. The project is in Euros and must be converted back to USD. The exchange rate is 0.83 Euros. The difference in the nominal rates between the two currencies is 2 percent. The appropriate discount rate for the project is estimated to be 10%, the US cost of capital for the company. What is the NPV of the project in US Dollars? NPV Year Cash Flows in Euro Year 0 € -2,900,000 Year 1 €1,300,000 Year 2 €1,300,000 Year 3 €1,300,000 Round to the nearest cent and format as "XXX,XXX.XX"You are International Business Manager at a UK based company. Considering high demand your company plans a full-scale expansion. Your company has identified USA and Europe as potential markets. You are requested to analyse both projects and advise. In considering such large project, you must work out the risk of each project, cost of capital and NPV. Allocate discount rate for each project accordingly and justify why you allocated this rate in your discussion. Discuss how international risks can be managed. Projected cash flows in respective currencies: Year Net Cash Flow – USD USA Net Cash Flow - EUR Europe0 -20 million -20 million 1 2 million 2 million2 4 million 3 million3 5 million 4 million4 6 million 8 million5 8 million 8 million Instructions:a. Discuss viability of both projects in today’s global business context and allocate discount rate. b. How much investment is needed for each project and what is the NPV of each project? c.…