To construct: NPV profile for the given project. Introduction: Capital Budgeting: It refers to the long-term investment decisions that has been taken by the top management of a company and that are irreversible in nature. These decisions require investment of large amount of cash of the company. Net Present Value (NPV): It is a method under capital budgeting which includes the computation of the net present value of the project in which company is investing. The calculation is done by calculating the difference between the value of cash inflow and value of cash outflow after taking into consideration the discounted rate.

Question

In 1895, the first U.S. Putting Green Championship was held. The winner's prize money was $170. In 2022, the winner's check was $3,950,000. a. What was the percentage increase per year in the winner's check over this period? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. b. If the winner's prize increases at the same rate, what will it be in 2053? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. a. Increase per year b. Winners prize in 2053 %

Answer 1

Question

Chapter 11, Problem 19P

a.

Summary Introduction

To construct: NPV profile for the given project.

Introduction:

Capital Budgeting:

It refers to the long-term investment decisions that has been taken by the top management of a company and that are irreversible in nature. These decisions require investment of large amount of cash of the company.

Net Present Value (NPV):

It is a method under capital budgeting which includes the computation of the net present value of the project in which company is investing. The calculation is done by calculating the difference between the value of cash inflow and value of cash outflow after taking into consideration the discounted rate.

b.

Summary Introduction

To explain: Whether the project should be accepted or not at 10% WACC and 20% WACC.

c.

Summary Introduction

To identify: A situation where the negative cash flows during or at the last of the project’s life might lead to multiple internal rate of return.

Introduction:

Internal Rate of Return (IRR):

It refers to the rate of return that is computed by the company to make a decision of selection of a project for investment. This rate provides the basis for selection of projects with a lower cost of capital and rejection of project with a higher cost of capital.

d.

Summary Introduction

To calculate: MIRR of the project at 10% and 20% WACC.

Introduction:

Modified Internal Rate of Return (MIRR):

It refers to the rate of return that is computed by the company to make a decision of selection and ranking of a project for investment. This is a modified version of IRR with reinvestment of cash flows at the cost of capital.

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In 1895, the first U.S. Putting Green Championship was held. The winner's prize money was $170. In 2022, the winner's check was $3,950,000. a. What was the percentage increase per year in the winner's check over this period? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. b. If the winner's prize increases at the same rate, what will it be in 2053? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. a. Increase per year b. Winners prize in 2053 %

Derek plans to retire on his 65th birthday. However, he plans to work part-time until he turns 73.00. During these years of part-time work, he will neither make deposits to nor take withdrawals from his retirement account. Exactly one year after the day he turns 73.0 when he fully retires, he will begin to make annual withdrawals of $183,008.00 from his retirement account until he turns 94.00. After this final withdrawal, he wants $1.52 million remaining in his account. He he will make contributions to his retirement account from his 26th birthday to his 65th birthday. To reach his goal, what must the contributions be? Assume a 6.00% interest rate. Round to 2 decimal places.

Derek plans to retire on his 65th birthday. However, he plans to work part-time until he turns 71.00. During these years of part-time work, he will neither make deposits to nor take withdrawals from his retirement account. Exactly one year after the day he turns 71.0 when he fully retires, he will begin to make annual withdrawals of $177,333.00 from his retirement account until he turns 94.00. He he will make contributions to his retirement account from his 26th birthday to his 65th birthday. To reach his goal, what must the contributions be? Assume a 9.00% interest rate. Submit Answer format: Currency: Round to: 2 decimal places.

Answer 2

Question

Chapter 11, Problem 19P

a.

Summary Introduction

To construct: NPV profile for the given project.

Introduction:

Capital Budgeting:

It refers to the long-term investment decisions that has been taken by the top management of a company and that are irreversible in nature. These decisions require investment of large amount of cash of the company.

Net Present Value (NPV):

It is a method under capital budgeting which includes the computation of the net present value of the project in which company is investing. The calculation is done by calculating the difference between the value of cash inflow and value of cash outflow after taking into consideration the discounted rate.

b.

Summary Introduction

To explain: Whether the project should be accepted or not at 10% WACC and 20% WACC.

c.

Summary Introduction

To identify: A situation where the negative cash flows during or at the last of the project’s life might lead to multiple internal rate of return.

Introduction:

Internal Rate of Return (IRR):

It refers to the rate of return that is computed by the company to make a decision of selection of a project for investment. This rate provides the basis for selection of projects with a lower cost of capital and rejection of project with a higher cost of capital.

d.

Summary Introduction

To calculate: MIRR of the project at 10% and 20% WACC.

Introduction:

Modified Internal Rate of Return (MIRR):

It refers to the rate of return that is computed by the company to make a decision of selection and ranking of a project for investment. This is a modified version of IRR with reinvestment of cash flows at the cost of capital.

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Answer 3

Question

Chapter 11, Problem 19P

a.

Summary Introduction

To construct: NPV profile for the given project.

Introduction:

Capital Budgeting:

It refers to the long-term investment decisions that has been taken by the top management of a company and that are irreversible in nature. These decisions require investment of large amount of cash of the company.

Net Present Value (NPV):

It is a method under capital budgeting which includes the computation of the net present value of the project in which company is investing. The calculation is done by calculating the difference between the value of cash inflow and value of cash outflow after taking into consideration the discounted rate.

b.

Summary Introduction

To explain: Whether the project should be accepted or not at 10% WACC and 20% WACC.

c.

Summary Introduction

To identify: A situation where the negative cash flows during or at the last of the project’s life might lead to multiple internal rate of return.

Introduction:

Internal Rate of Return (IRR):

It refers to the rate of return that is computed by the company to make a decision of selection of a project for investment. This rate provides the basis for selection of projects with a lower cost of capital and rejection of project with a higher cost of capital.

d.

Summary Introduction

To calculate: MIRR of the project at 10% and 20% WACC.

Introduction:

Modified Internal Rate of Return (MIRR):

It refers to the rate of return that is computed by the company to make a decision of selection and ranking of a project for investment. This is a modified version of IRR with reinvestment of cash flows at the cost of capital.

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Answer 4

Question

Chapter 11, Problem 19P

a.

Summary Introduction

To construct: NPV profile for the given project.

Introduction:

Capital Budgeting:

It refers to the long-term investment decisions that has been taken by the top management of a company and that are irreversible in nature. These decisions require investment of large amount of cash of the company.

Net Present Value (NPV):

It is a method under capital budgeting which includes the computation of the net present value of the project in which company is investing. The calculation is done by calculating the difference between the value of cash inflow and value of cash outflow after taking into consideration the discounted rate.

b.

Summary Introduction

To explain: Whether the project should be accepted or not at 10% WACC and 20% WACC.

c.

Summary Introduction

To identify: A situation where the negative cash flows during or at the last of the project’s life might lead to multiple internal rate of return.

Introduction:

Internal Rate of Return (IRR):

It refers to the rate of return that is computed by the company to make a decision of selection of a project for investment. This rate provides the basis for selection of projects with a lower cost of capital and rejection of project with a higher cost of capital.

d.

Summary Introduction

To calculate: MIRR of the project at 10% and 20% WACC.

Introduction:

Modified Internal Rate of Return (MIRR):

It refers to the rate of return that is computed by the company to make a decision of selection and ranking of a project for investment. This is a modified version of IRR with reinvestment of cash flows at the cost of capital.

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Answer 5

Chapter 11, Problem 19P

a.

Summary Introduction

To construct: NPV profile for the given project.

Introduction:

Capital Budgeting:

It refers to the long-term investment decisions that has been taken by the top management of a company and that are irreversible in nature. These decisions require investment of large amount of cash of the company.

Net Present Value (NPV):

It is a method under capital budgeting which includes the computation of the net present value of the project in which company is investing. The calculation is done by calculating the difference between the value of cash inflow and value of cash outflow after taking into consideration the discounted rate.

b.

Summary Introduction

To explain: Whether the project should be accepted or not at 10% WACC and 20% WACC.

c.

Summary Introduction

To identify: A situation where the negative cash flows during or at the last of the project’s life might lead to multiple internal rate of return.

Introduction:

Internal Rate of Return (IRR):

It refers to the rate of return that is computed by the company to make a decision of selection of a project for investment. This rate provides the basis for selection of projects with a lower cost of capital and rejection of project with a higher cost of capital.

d.

Summary Introduction

To calculate: MIRR of the project at 10% and 20% WACC.

Introduction:

Modified Internal Rate of Return (MIRR):

It refers to the rate of return that is computed by the company to make a decision of selection and ranking of a project for investment. This is a modified version of IRR with reinvestment of cash flows at the cost of capital.

Answer 6

Chapter 11, Problem 19P

a.

Summary Introduction

To construct: NPV profile for the given project.

Introduction:

Capital Budgeting:

It refers to the long-term investment decisions that has been taken by the top management of a company and that are irreversible in nature. These decisions require investment of large amount of cash of the company.

Net Present Value (NPV):

It is a method under capital budgeting which includes the computation of the net present value of the project in which company is investing. The calculation is done by calculating the difference between the value of cash inflow and value of cash outflow after taking into consideration the discounted rate.

Answer 7

Chapter 11, Problem 19P

a.

Summary Introduction

To construct: NPV profile for the given project.

Introduction:

Capital Budgeting:

It refers to the long-term investment decisions that has been taken by the top management of a company and that are irreversible in nature. These decisions require investment of large amount of cash of the company.

Net Present Value (NPV):

It is a method under capital budgeting which includes the computation of the net present value of the project in which company is investing. The calculation is done by calculating the difference between the value of cash inflow and value of cash outflow after taking into consideration the discounted rate.

Answer 8

b.

Summary Introduction

To explain: Whether the project should be accepted or not at 10% WACC and 20% WACC.

Answer 9

b.

Summary Introduction

To explain: Whether the project should be accepted or not at 10% WACC and 20% WACC.

Answer 10

c.

Summary Introduction

To identify: A situation where the negative cash flows during or at the last of the project’s life might lead to multiple internal rate of return.

Introduction:

Internal Rate of Return (IRR):

It refers to the rate of return that is computed by the company to make a decision of selection of a project for investment. This rate provides the basis for selection of projects with a lower cost of capital and rejection of project with a higher cost of capital.

Answer 11

c.

Summary Introduction

To identify: A situation where the negative cash flows during or at the last of the project’s life might lead to multiple internal rate of return.

Introduction:

Internal Rate of Return (IRR):

It refers to the rate of return that is computed by the company to make a decision of selection of a project for investment. This rate provides the basis for selection of projects with a lower cost of capital and rejection of project with a higher cost of capital.

Answer 12

d.

Summary Introduction

To calculate: MIRR of the project at 10% and 20% WACC.

Introduction:

Modified Internal Rate of Return (MIRR):

It refers to the rate of return that is computed by the company to make a decision of selection and ranking of a project for investment. This is a modified version of IRR with reinvestment of cash flows at the cost of capital.

Answer 13

d.

Summary Introduction

To calculate: MIRR of the project at 10% and 20% WACC.

Introduction:

Modified Internal Rate of Return (MIRR):

It refers to the rate of return that is computed by the company to make a decision of selection and ranking of a project for investment. This is a modified version of IRR with reinvestment of cash flows at the cost of capital.

Answer 14

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Ch. 11 - How are project classifications used in the...Ch. 11 - Prob. 2Q Ch. 11 - Why is the NFV of a relatively long-term project...Ch. 11 - Prob. 4Q Ch. 11 - If two mutually exclusive projects were being...Ch. 11 - Discuss the following statement: If a firm has...Ch. 11 - Why might it be rational for a small firm that...Ch. 11 - Project X is very risky and has an NPV of 3...Ch. 11 - Prob. 9Q Ch. 11 - A firm has a 100 million capital budget. It is...

Solution Summary: The author explains the NPV profile for the given project. Capital budgeting is the long-term investment decisions that require investment of large amount of cash.

To explain: Whether the project should be accepted or not at 10% WACC and 20% WACC.

Chapter 11 Solutions