Consider the following cash flow and calculate the NPV of the project with a discount rate of 10%. $1,00,000 a) -$17,200.85 b) -$12,500.20 c) -$21,985.70 d) -$14,428.00 $20,000 $20,000 $20,000 $20,000 $20,000 1 2 3 + 5
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- a) Calculate the discounted payback period for the project. b) Calculate the Net Present Value of the project. c) Mr. Mokhodu, the recently hired manager for this potential project is not convinced that using the IRR is sufficient to assess the project’s viability. Calculate the Modified Internal Rate of Return (MIRR) that should be used.1) A small company purchased now for $23,000 will lose $1,200 each year for the first four years. An additional $8,000 is invested in the company during the fourth year will result in a profit of $5,500 each year from the fifth through to fifteen year. At the end of 15 year the company can be sold for $33,000. The desired rate of return is 15%. A) Calculate the NPV of the project.*You are considering the following project: It pays you $2,500 at the end of the first year, costs $8,500 by the end of the second year and brings $6,800 a year after. What is the project's internal rate of return(s), exact external rate of return and the approximate external rate of return it current MARR is 14%?
- The Monty Corporation has a staff of sales people who are paid a monthly salary of $1,400.00 plus an incremental commission based on the table below. If Sally sells $25,700.00, what is her total gross pay for the month? Level Sales Volume CommissionRate 1 9,100–17,600 3.1% 2 Over 17,600 4% $2,269.60 $2,369.60 $2,469.60 $2,569.60Identify the special cash flow category for each of the following. While developing a new product line, Cook Company spent $3 million two years ago to build a plant for a new product. Ultimately that project was not pursued. You are now evaluating a new project and would locate production inside of this building. What type of cash flow is the cost of the building? You hope to increase membership at your yoga studio by opening a smoothie bar inside of the yoga studio. When considering the feasibility of the smoothie bar, what type of cash flow is the increased studio membership? Suppose Walker Publishing Company is considering bringing out a new finance text whose projected revenues include some revenues that will be taken away from another of Walker's books. What type of cash flow are the lost sales on the older book? You currently operate a taco truck but are considering converting the food truck into a bubble tea truck. What type of cash flow are the profits currently earned…1) Calculate the payback period, the discounted payback period and the NPV for the following project using a rate of 5%. Time Cash Flow 0 - $63,000 1 - $ 21,000 2 - $ 21,000 3 - $ 21,000 4 - $ 21,000 Payback = Discounted Payback =
- Consider the cashflow (n = 10 years, MARR = e = 14%) Cash Flow A Investment Revenues P 180,000 P 350,000 per year Expenses P 400,000 per year for the first 3 years, decreasing by P 50,000 per year thereafter a. Calculate the Internal Rate of Return (IRR) of each project. b. Calculate the External Rate of Return (ERR) of each project. Salvage Value P 40,000Q10. The equation that will yield the external rate of return (ERR) of the following project is: $25,000 $6,000 Investment Cost Annual Receipts Annual Expenses Market Value $7,000 Expected Life 5 years E% 8% A. 25,000 (F/P, i%, 5) = 7,000 + 6,000 (P/F, 8%, 5) B. 25,000 (F/P, i%, 5) = 7,000 6,000 (P/A, 8%, 5) C. 25,000 (F/P, i%, 5) = 7,000 + 6,000 (F/A, 8%, 5) D. 25,000 (P/F, i%, 5) = 7,000 - 6,000 (F/A, 8%, 5) E. NoneThe internal rate of return (IRR) refers to the compound annual rate of return that a project generates based on its up-front cost and subsequent cash flows. Consider this case: Blue Llama Mining Company is evaluating a proposed capital budgeting project (project Delta) that will require an initial investment of $1,500,000. Blue Llama Mining Company has been basing capital budgeting decisions on a project's NPV; however, its new CFO wants to start using the IRR method for capital budgeting decisions. The CFO says that the IRR is a better method because percentages and returns are easier to understand and to compare to required returns. Blue Llama Mining Company's WACC is 9%, and project Delta has the same risk as the firm's average project. The project is expected to generate the following net cash flows: Year Cash Flow Year 1 $325,000 Year 2 $450,000 Year 3 $400,000 Year 4 $475,000
- Describe in detail why a project with a Present Worth (PW) equal to or greater than zero is economically justifiableQuentin is also considering one additional project, Project F. It proposes that the company establishes a completely new business line. As part of the Project F evaluation, the company had paid a consulting firm £5,000 to perform a test marketing analysis. The expenditure was made last year. Discuss whether this cost is relevant for the capital budgeting decision that the board must make for this project.What is the net effect on a project's NPV, if it's salvage value in 10 years increases from $24126 to $48252? Assume the discount rate is 8%, the CCA rate is 14.1%, the tax rate is 25%, and the half-year rule applies. a) $6734 b) $12520 c) $9393 d) $11262 e) $16860