Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Basic Finance Expert

Problem 1

Assume a company is considering two independent projects, Project A and Project B.  Cash outlay for Project A is $14,000. Cash outlay for Project B is $20,000. Company’s cost of capital is 12%. The following table shows after-tax cash flows.  For each project, find out the NPV, the IRR, the MIRR, and indicate accept/reject decision.

Year    Project A    Project B
1         $4800         $6700
2         $4800         $6700
3         $4800         $6700
4         $4800         $6700

Problem 2

Assume a company is considering two investment projects. Both projects need an upfront expenditure of $30 million. The company estimates that cost of capital is 10% and that the investments would result in the following after-tax cash flows (in millions of dollars). Complete parts (a) through (e) below.

Year    Project A    Project B
1          $28             $10
2          $20             $15
3          $10             $20
4           $5              $25

a) Determine the regular payback period for each project.

b) Determine the discounted payback period for each project.

c) Suppose that the two projects are independent and cost of capital is 10%. Which project or projects must the company undertake? Base your results on the NPV.

d) Suppose that the two projects are mutually exclusive and the cost of capital is 5%. Which project or projects should the company undertake? Base your results on the MIRR.

e) Describe why quantitative measures might not always be the best way to evaluate a project.

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M91874

Have any Question? 


Related Questions in Basic Finance

The real risk-free rate of interest is 3 percent inflation

The real risk-free rate of interest is 3 percent. Inflation is expected to be 4 percent this coming year, jump to 5 percent next year, and increase to 6 percent the year after (Year 3). According to the expectations theo ...

The suboptimal glass company uses a process of capital

The Suboptimal Glass Company uses a process of capital rationing in its decision making. The firm's cost of capital is 10 percent. It will only invest $77,000 this year. It has determined the internal rate of return for ...

Analyze a sales letter or email you receivebe on the

Analyze a sales letter or email you receive. Be on the lookout for sales letters you receive at home or through email. Bring one to class so you can discuss the example with other students. In small groups, discuss how t ...

1 briefly explain why the financial system is one of the

1. Briefly explain why the financial system is one of the most highly regulated sectors of the economy. 2. What is the Federal Reserve? Who appoints the members of the Federal Reserve's Board of Governors? How do the Fed ...

A 1000 bond is paying a coupon interest rate of 7 the

A $1,000 Bond is paying a coupon interest rate of 7%. The current Required Rate of Return in the market is 5%. If you were buying this Bond on the market today, would you expect to pay more than $1,000 for it (Premium) o ...

The cost of capital weighted average cost of capitalthe

The Cost of Capital: Weighted Average Cost of Capital The firm's target capital structure is the mix of debt, preferred stock, and common equity the firm plans to raise funds for its future projects. The target proportio ...

In early 2010 newspapers reported that nba superstar kobe

In early 2010, newspapers reported that NBA superstar Kobe Bryant had signed an extension to his existing contract. His salaries in future years under the contract extension would be as follows: For the season ending in ...

1 is a foreclosure sale sometimes desirable or even

1. Is a foreclosure sale sometimes desirable or even necessary when the mortgagor is willing to give a voluntary deed? 2. What are the risks to the lender if a borrower declares bankruptcy? 3. What is a deficiency judgme ...

Budget assignmentrefer to the city of granston case 11-3 at

Budget Assignment Refer to the City of Granston Case 11-3 at the end of Chapter 11. Using the ‘Current Year Q-3' data found in Exhibit 2 and Exhibit 3, create a project supply and materials budget based on the informatio ...

Compute the intrinsic values time values and lower bounds

Compute the intrinsic values, time values, and lower bounds of the following puts. Identify any profit opportunities that may exist. Treat these as American options for purposes of determining the intrinsic values and ti ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

WalMart Identification of theory and critical discussion

Drawing on the prescribed text and/or relevant academic literature, produce a paper which discusses the nature of group

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro