Initial capital outlay, cash flows after tax and terminal cash flow of this project needs to be computed. Concept introduction: Capital Budgeting technique is the most useful tool for financial management which helps to understand the investment in project is financially viable or not.

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Answer 1

Question

Chapter 12, Problem 4P

a.

Summary Introduction

Interpretation: Initial capital outlay, cash flows after tax and terminal cash flow of this project needs to be computed.

Concept introduction:Capital Budgeting technique is the most useful tool for financial management which helps to understand the investment in project is financially viable or not.

b.

Summary Introduction

Interpretation: Net present value, Profitability Index, IRR, MIRR, Payback period and discounted payback period needs to be computed.

Concept introduction: Capital Budgeting technique is the most useful tool for financial management which helps to understand the investment in project is financially viable or not.

Payback period 0.84

Discounted Payback period 0.9299

NPV $1,883,164

PI 3.8044

IRR 119%

MIRR 52%

Payback period: It is the period in which cash flow of investment covers the initial investment. It can be computed shown below:

Discounted payback period: It is the period in which discounted cash flow of investment covers the initial investment. It can be computed shown below:

Net present value: NPV is the sum of present value of the cash flows and initial investment when discounted at 11%. It can be computed as:

Profitability Index: It is used to analyze the profitability of an investment wherein its cash flow is divided by the initial investment It can be computed as:

IRR& MIRR: Internal rate of return is the expected return on the investment while MIRR is the rate of return after considering reinvestment rate. It can be computed as:

The formula used to compute IRR and MIRR is as follows:

c.

Interpretation: A scenario analysis is required.

Concept introduction: Capital Budgeting technique is the most useful tool for financial management which helps to understand the investment in project is financially viable or not.

1. Click on “Data” menu and select “scenario Manager” under “what if Analysis” option, then click on “add” option.Then rename the scenario name and select changing cells which need to replace.

2. Enter values which need to be resulted in that scenario, accordingly.

3. Then click on “summary” option to get the various scenario analysis.

4. Scenario Analysis will represent the final output in given scenario.

c.

Summary Introduction

Interpretation: A scenario analysis is required.

Concept introduction: Capital Budgeting technique is the most useful tool for financial management which helps to understand the investment in project is financially viable or not.

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Answer 2

Question

Chapter 12, Problem 4P

a.

Summary Introduction

Interpretation: Initial capital outlay, cash flows after tax and terminal cash flow of this project needs to be computed.

Concept introduction:Capital Budgeting technique is the most useful tool for financial management which helps to understand the investment in project is financially viable or not.

b.

Summary Introduction

Interpretation: Net present value, Profitability Index, IRR, MIRR, Payback period and discounted payback period needs to be computed.

Concept introduction: Capital Budgeting technique is the most useful tool for financial management which helps to understand the investment in project is financially viable or not.

Payback period 0.84

Discounted Payback period 0.9299

NPV $1,883,164

PI 3.8044

IRR 119%

MIRR 52%

Payback period: It is the period in which cash flow of investment covers the initial investment. It can be computed shown below:

Discounted payback period: It is the period in which discounted cash flow of investment covers the initial investment. It can be computed shown below:

Net present value: NPV is the sum of present value of the cash flows and initial investment when discounted at 11%. It can be computed as:

Profitability Index: It is used to analyze the profitability of an investment wherein its cash flow is divided by the initial investment It can be computed as:

IRR& MIRR: Internal rate of return is the expected return on the investment while MIRR is the rate of return after considering reinvestment rate. It can be computed as:

The formula used to compute IRR and MIRR is as follows:

c.

Interpretation: A scenario analysis is required.

Concept introduction: Capital Budgeting technique is the most useful tool for financial management which helps to understand the investment in project is financially viable or not.

1. Click on “Data” menu and select “scenario Manager” under “what if Analysis” option, then click on “add” option.Then rename the scenario name and select changing cells which need to replace.

2. Enter values which need to be resulted in that scenario, accordingly.

3. Then click on “summary” option to get the various scenario analysis.

4. Scenario Analysis will represent the final output in given scenario.

c.

Summary Introduction

Interpretation: A scenario analysis is required.

Concept introduction: Capital Budgeting technique is the most useful tool for financial management which helps to understand the investment in project is financially viable or not.

Expert Solution & Answer

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Answer 3

Question

Chapter 12, Problem 4P

a.

Summary Introduction

Interpretation: Initial capital outlay, cash flows after tax and terminal cash flow of this project needs to be computed.

Concept introduction:Capital Budgeting technique is the most useful tool for financial management which helps to understand the investment in project is financially viable or not.

b.

Summary Introduction

Interpretation: Net present value, Profitability Index, IRR, MIRR, Payback period and discounted payback period needs to be computed.

Concept introduction: Capital Budgeting technique is the most useful tool for financial management which helps to understand the investment in project is financially viable or not.

Payback period 0.84

Discounted Payback period 0.9299

NPV $1,883,164

PI 3.8044

IRR 119%

MIRR 52%

Payback period: It is the period in which cash flow of investment covers the initial investment. It can be computed shown below:

Discounted payback period: It is the period in which discounted cash flow of investment covers the initial investment. It can be computed shown below:

Net present value: NPV is the sum of present value of the cash flows and initial investment when discounted at 11%. It can be computed as:

Profitability Index: It is used to analyze the profitability of an investment wherein its cash flow is divided by the initial investment It can be computed as:

IRR& MIRR: Internal rate of return is the expected return on the investment while MIRR is the rate of return after considering reinvestment rate. It can be computed as:

The formula used to compute IRR and MIRR is as follows:

c.

Interpretation: A scenario analysis is required.

Concept introduction: Capital Budgeting technique is the most useful tool for financial management which helps to understand the investment in project is financially viable or not.

1. Click on “Data” menu and select “scenario Manager” under “what if Analysis” option, then click on “add” option.Then rename the scenario name and select changing cells which need to replace.

2. Enter values which need to be resulted in that scenario, accordingly.

3. Then click on “summary” option to get the various scenario analysis.

4. Scenario Analysis will represent the final output in given scenario.

c.

Summary Introduction

Interpretation: A scenario analysis is required.

Concept introduction: Capital Budgeting technique is the most useful tool for financial management which helps to understand the investment in project is financially viable or not.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 4

Question

Chapter 12, Problem 4P

a.

Summary Introduction

Interpretation: Initial capital outlay, cash flows after tax and terminal cash flow of this project needs to be computed.

Concept introduction:Capital Budgeting technique is the most useful tool for financial management which helps to understand the investment in project is financially viable or not.

b.

Summary Introduction

Interpretation: Net present value, Profitability Index, IRR, MIRR, Payback period and discounted payback period needs to be computed.

Concept introduction: Capital Budgeting technique is the most useful tool for financial management which helps to understand the investment in project is financially viable or not.

Payback period 0.84

Discounted Payback period 0.9299

NPV $1,883,164

PI 3.8044

IRR 119%

MIRR 52%

Payback period: It is the period in which cash flow of investment covers the initial investment. It can be computed shown below:

Discounted payback period: It is the period in which discounted cash flow of investment covers the initial investment. It can be computed shown below:

Net present value: NPV is the sum of present value of the cash flows and initial investment when discounted at 11%. It can be computed as:

Profitability Index: It is used to analyze the profitability of an investment wherein its cash flow is divided by the initial investment It can be computed as:

IRR& MIRR: Internal rate of return is the expected return on the investment while MIRR is the rate of return after considering reinvestment rate. It can be computed as:

The formula used to compute IRR and MIRR is as follows:

c.

Interpretation: A scenario analysis is required.

Concept introduction: Capital Budgeting technique is the most useful tool for financial management which helps to understand the investment in project is financially viable or not.

1. Click on “Data” menu and select “scenario Manager” under “what if Analysis” option, then click on “add” option.Then rename the scenario name and select changing cells which need to replace.

2. Enter values which need to be resulted in that scenario, accordingly.

3. Then click on “summary” option to get the various scenario analysis.

4. Scenario Analysis will represent the final output in given scenario.

c.

Summary Introduction

Interpretation: A scenario analysis is required.

Concept introduction: Capital Budgeting technique is the most useful tool for financial management which helps to understand the investment in project is financially viable or not.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 5

Chapter 12, Problem 4P

a.

Summary Introduction

Interpretation: Initial capital outlay, cash flows after tax and terminal cash flow of this project needs to be computed.

Concept introduction:Capital Budgeting technique is the most useful tool for financial management which helps to understand the investment in project is financially viable or not.

b.

Summary Introduction

Interpretation: Net present value, Profitability Index, IRR, MIRR, Payback period and discounted payback period needs to be computed.

Concept introduction: Capital Budgeting technique is the most useful tool for financial management which helps to understand the investment in project is financially viable or not.

Payback period 0.84

Discounted Payback period 0.9299

NPV $1,883,164

PI 3.8044

IRR 119%

MIRR 52%

Payback period: It is the period in which cash flow of investment covers the initial investment. It can be computed shown below:

Discounted payback period: It is the period in which discounted cash flow of investment covers the initial investment. It can be computed shown below:

Net present value: NPV is the sum of present value of the cash flows and initial investment when discounted at 11%. It can be computed as:

Profitability Index: It is used to analyze the profitability of an investment wherein its cash flow is divided by the initial investment It can be computed as:

IRR& MIRR: Internal rate of return is the expected return on the investment while MIRR is the rate of return after considering reinvestment rate. It can be computed as:

The formula used to compute IRR and MIRR is as follows:

c.

Interpretation: A scenario analysis is required.

Concept introduction: Capital Budgeting technique is the most useful tool for financial management which helps to understand the investment in project is financially viable or not.

1. Click on “Data” menu and select “scenario Manager” under “what if Analysis” option, then click on “add” option.Then rename the scenario name and select changing cells which need to replace.

2. Enter values which need to be resulted in that scenario, accordingly.

3. Then click on “summary” option to get the various scenario analysis.

4. Scenario Analysis will represent the final output in given scenario.

c.

Summary Introduction

Interpretation: A scenario analysis is required.

Concept introduction: Capital Budgeting technique is the most useful tool for financial management which helps to understand the investment in project is financially viable or not.

Answer 6

Chapter 12, Problem 4P

a.

Summary Introduction

Interpretation: Initial capital outlay, cash flows after tax and terminal cash flow of this project needs to be computed.

Concept introduction:Capital Budgeting technique is the most useful tool for financial management which helps to understand the investment in project is financially viable or not.

Answer 7

Chapter 12, Problem 4P

a.

Summary Introduction

Interpretation: Initial capital outlay, cash flows after tax and terminal cash flow of this project needs to be computed.

Concept introduction:Capital Budgeting technique is the most useful tool for financial management which helps to understand the investment in project is financially viable or not.

Answer 8

b.

Summary Introduction

Interpretation: Net present value, Profitability Index, IRR, MIRR, Payback period and discounted payback period needs to be computed.

Concept introduction: Capital Budgeting technique is the most useful tool for financial management which helps to understand the investment in project is financially viable or not.

Payback period 0.84

Discounted Payback period 0.9299

NPV $1,883,164

PI 3.8044

IRR 119%

MIRR 52%

Payback period: It is the period in which cash flow of investment covers the initial investment. It can be computed shown below:

Discounted payback period: It is the period in which discounted cash flow of investment covers the initial investment. It can be computed shown below:

Net present value: NPV is the sum of present value of the cash flows and initial investment when discounted at 11%. It can be computed as:

Profitability Index: It is used to analyze the profitability of an investment wherein its cash flow is divided by the initial investment It can be computed as:

IRR& MIRR: Internal rate of return is the expected return on the investment while MIRR is the rate of return after considering reinvestment rate. It can be computed as:

The formula used to compute IRR and MIRR is as follows:

c.

Interpretation: A scenario analysis is required.

Concept introduction: Capital Budgeting technique is the most useful tool for financial management which helps to understand the investment in project is financially viable or not.

1. Click on “Data” menu and select “scenario Manager” under “what if Analysis” option, then click on “add” option.Then rename the scenario name and select changing cells which need to replace.

2. Enter values which need to be resulted in that scenario, accordingly.

3. Then click on “summary” option to get the various scenario analysis.

4. Scenario Analysis will represent the final output in given scenario.

Answer 9

b.

Summary Introduction

Interpretation: Net present value, Profitability Index, IRR, MIRR, Payback period and discounted payback period needs to be computed.

Concept introduction: Capital Budgeting technique is the most useful tool for financial management which helps to understand the investment in project is financially viable or not.

Payback period 0.84

Discounted Payback period 0.9299

NPV $1,883,164

PI 3.8044

IRR 119%

MIRR 52%

Payback period: It is the period in which cash flow of investment covers the initial investment. It can be computed shown below:

Discounted payback period: It is the period in which discounted cash flow of investment covers the initial investment. It can be computed shown below:

Net present value: NPV is the sum of present value of the cash flows and initial investment when discounted at 11%. It can be computed as:

Profitability Index: It is used to analyze the profitability of an investment wherein its cash flow is divided by the initial investment It can be computed as:

IRR& MIRR: Internal rate of return is the expected return on the investment while MIRR is the rate of return after considering reinvestment rate. It can be computed as:

The formula used to compute IRR and MIRR is as follows:

c.

Interpretation: A scenario analysis is required.

Concept introduction: Capital Budgeting technique is the most useful tool for financial management which helps to understand the investment in project is financially viable or not.

1. Click on “Data” menu and select “scenario Manager” under “what if Analysis” option, then click on “add” option.Then rename the scenario name and select changing cells which need to replace.

2. Enter values which need to be resulted in that scenario, accordingly.

3. Then click on “summary” option to get the various scenario analysis.

4. Scenario Analysis will represent the final output in given scenario.

Answer 10

c.

Summary Introduction

Interpretation: A scenario analysis is required.

Concept introduction: Capital Budgeting technique is the most useful tool for financial management which helps to understand the investment in project is financially viable or not.

Answer 11

c.

Summary Introduction

Interpretation: A scenario analysis is required.

Concept introduction: Capital Budgeting technique is the most useful tool for financial management which helps to understand the investment in project is financially viable or not.

Answer 12

Expert Solution & Answer

Answer 13

Expert Solution & Answer

Answer 14

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Answer 15

Ch. 12 - Prob. 4P

Initial capital outlay, cash flows after tax and terminal cash flow of this project needs to be computed. Concept introduction: Capital Budgeting technique is the most useful tool for financial management which helps to understand the investment in project is financially viable or not.

Solution Summary: The author explains that Capital Budgeting technique is the most useful tool for financial management to understand the investment in project is financially viable or not.

Concept explainers

Videos

Interpretation: A scenario analysis is required.

Concept introduction: Capital Budgeting technique is the most useful tool for financial management which helps to understand the investment in project is financially viable or not.

Want to see the full answer?

Chapter 12 Solutions

Initial capital outlay, cash flows after tax and terminal cash flow of this project needs to be computed. Concept introduction: Capital Budgeting technique is the most useful tool for financial management which helps to understand the investment in project is financially viable or not.

Solution Summary: The author explains that Capital Budgeting technique is the most useful tool for financial management to understand the investment in project is financially viable or not.

Concept explainers

Videos

Interpretation: A scenario analysis is required. Concept introduction: Capital Budgeting technique is the most useful tool for financial management which helps to understand the investment in project is financially viable or not.

Want to see the full answer?

Chapter 12 Solutions

Interpretation: A scenario analysis is required.

Concept introduction: Capital Budgeting technique is the most useful tool for financial management which helps to understand the investment in project is financially viable or not.