QUESTION 5 Garfield Inc is considering a new project that requires an initial investment of $39500 and will generate a net income of $5242 per year, if the project's profitability index is 1.3, the present value of the project's future cash flows is $_ Round to the nearest dollar.
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- Redbird Company is considering a project with an initial investment of $265,000 in new equipment that will yield annual net cash flows of $45,800 each year over its seven-year life. The companys minimum required rate of return is 8%. What is the internal rate of return? Should Redbird accept the project based on IRR?QUESTION 5 GoGo Inc. is considering a new project that requires an initial investment of $36140 and will generate a net income of $5518 per year, if the project's profitability index is 2.8, the present value of the project's future cash flows is $ Round to the nearest dollar.QUESTION 1 XYZ is evaluating a project that would require an initial investment of $72,300.00 today. The project is expected to produce annual cash flows of $8,400.00 each year forever with the first annual cash flow expected in 1 year. The NPV of the project is $7,500.00. What is the IRR of the project? O 11.62% (plus or minus 0.02 percentage points) 10.53% (plus or minus 0.02 percentage points) 10.37% (plus or minus 0.02 percentage points) 12.96% (plus or minus 0.02 percentage points) O None of the above is within 0.02 percentage points of the correct answer
- Question 4 You are considering a project with an initial cash outlay of $6000 and expected free cash flows of $2000,2000,2000,2000,2000 and $3000 at the end of each year for 6 years. What is modified internal rate of return (MIRR) on this project if the cost of capital and reinvestment rate is the same as 12 percent? O 19.2222 % O 4.80556 % O 24.0278 % O 28.8334 % O 14.4167 %Question 3 Fisca Ltd Is Considering Two Independent Projects, Project A And Project B. The Initial Cash Outlay Associated With Project A Is P50,000 And The Initial Cash Outlay Associated With Project B Is P70,000. The Required Rate Of Return On Both Projects Is 12%. The Expected Annual Free Cash Flows From Each Project Are As Follows: YEAR PROJECT A PROJECT B 0 -50,000 -70,000 1 12000 13,000 2 12000 13000 3 12000 13000 4 12000 13000 5 12000 13000 6 12,000 13000 Required: a.For both projects, calculate The net present value. The internal rate of return. The profitability index. Assuming there is capital rationing, advice Fisca ltd which project should be accepted over the other. Explain the limitations of using a profitability index in a situation where there is capital rationing.Question 1 Next Gen Corporation is considering two investment opportunities. The company can choose either to invest in Project K or Project M. The expected annual free cash flows for each project as follows: Year 0 1 2 3 4 5 Cash flows (RM) Project K Project M (7,000) (7,000) 1,800 (2,500) 1,800 4,800 0 0 0 0 3,800 10 000 If the required rate of return is 8%, calculate: 1. calculate the payback period for each project. 2. calculate the net present value for each project. 3. based on the two investment techniques, which project should be accepted?
- more. 3. Net present value method Aa Aa Consider the case of Underwood Manufacturing: Underwood Manufacturing is evaluating a proposed capital budgeting project that will require an initial investment of $120,000. The project is expected to generate the following net cash flows: Year Cash Flow Year 1 $37,600 Year 2 $50,500 Year 3 $45,000 Year 4 $41,900 Assume the desired rate of return on a project of this type is 10%. What is the net present value of this project? -$4,415.10 $18,344.79 -$7,244.50 $23,914.50 Suppose Underwood Manufacturing has enough capital to fund the project, and the project is not competing for funding with other projects. Should Underwood Manufacturing accept or reject this project? Accept the project Reject the projectQuestion 24 The Flour Baker is considering a project with the following cash flows. Should this project be accepted based on its internal rate of return if the required return is 5 percent? Year Cash Flows 0 -$200,000 1 40,000 2 50,000 3 60,000 4 70,000 Group of answer choices Yes, because the project’s IRR is higher than the required rate Yes, because the project’s IRR is lower than the required rate No, because the project’s IRR is higher than the required rate No, because the project’s IRR is lower than the required rate You are indifferent5 Suppose your firm is considering investing in a project with the cash flows shown below, that the required rate of return on projects of this risk class is 7 percent, and that the maximum allowable payback and discounted payback statistics for the project are 2.0 and 3.0 years, respectively. Time: 1 2 3 4 Cash flow: -$4,700 $1,170 $2,370 $1,570 $1,570 $1,370 $1,170 Use the discounted payback decision rule to evaluate this project. (Round your answer to 2 decimal places.) Print Ferences Discounted payback years Should it be accepted or rejected? аcсepted O rejected
- 7. The NPV and payback period What information does the payback period provide? Suppose you are evaluating a project with the expected future cash inflows shown in the following table. Your boss has asked you to calculate the project’s net present value (NPV). You don’t know the project’s initial cost, but you do know the project’s regular, or conventional, payback period is 2.50 years. Year Cash Flow Year 1 $375,000 Year 2 $475,000 Year 3 $500,000 Year 4 $400,000 If the project’s weighted average cost of capital (WACC) is 8%, the project’s NPV (rounded to the nearest dollar) is: $345,386 $328,117 $414,463 $362,655Question 2 (Investment Decision Rules and Project Cash Flows) Consider a hypothetical economy that has NO tax. ABC Ltd. is considering investing in a 2-year project which is expected to generate the following year-end cash flows: C1 = $110 million, C2 = $115 million. The yearly discount rate for the project is 10%. The initial cost of the project is $200 million. Write down the numerical formula for computing the IRR of this project. What is the minimum IRR value that would make this project acceptable? Explain.7. The NPV and payback period What information does the payback period provide? Suppose you are evaluating a project with the expected future cash inflows shown in the following table. Your boss has asked you to calculate the project’s net present value (NPV). You don’t know the project’s initial cost, but you do know the project’s regular, or conventional, payback period is 2.50 years. Year Cash Flow Year 1 $300,000 Year 2 $450,000 Year 3 $500,000 Year 4 $500,000 If the project’s weighted average cost of capital (WACC) is 8%, the project’s NPV (rounded to the nearest dollar) is: $470,812 $449,412 $513,613 $428,011 Which of the following statements indicate a disadvantage of using the regular payback period (not the discounted payback period) for capital budgeting decisions? Check all that apply. The payback period does not take the time value of money into account. The payback period is calculated using net…
