Problem:
Your company is planning to install a new facility in its Edmonton plant for manufacturing air cleaning equipment for coal fired power stations. The project life is 8 years. MARR (the minimum attractive rate of return) is i%. The anticipated after tax' cash flows of the project (in millions of dollars) are given below:
|
End of year
|
0
|
1
|
2
|
3
|
4
|
5
|
6
|
7
|
8
|
|
Cash flow
|
-6.5
|
2.0
|
2.0
|
2.0
|
X+2.0
|
2.0
|
2.0
|
2.0
|
Y+2.0
|
Determine:
- the value of Y if the present value of the project is $4,600,000, X = 0 and I = 12% (monthly compounding)
- the present value of the Project if Y = X, the equivalent uniform annual value of the project is 1.5X and I = 10% (yearly compounding)
- the value of Y if X = 0, i = 10% (yearly compounding) and the external rate of return of the Project is 20%
- the internal rate of return if X = -3.0 and Y =1.0
- the minimum value of X that would make the project (economically) acceptable if i = 10 % (yearly compounding) and Y = 4X
Additional Information:
This question is generally belongs to the Finance as well as it explains about computation of present value and internal rate of return for the project.