Homework Answers
Answer (a):
There is no tax.
Hence:
There is no depreciation tax shield.
Cash flows (rows highlighted) for project 1 and project 2, year wise are calculated and given below:
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Consider Table 4. The Burren Inc. is considering investing in projects 1 and 2. The initial...
Consider Table 1. Public Life Inc. is considering investing in projects 1 and 2. The initial...
Consider Table 1. Public Life Inc. is considering investing in projects 1 and 2. The initial cost of project 1 is 10,000 and e3,000 for project 2. Each project lasts four years. Straight-line depreciation method is used The minimum accounting rate of return is 10%. The discount rate is 10% for both projects, and the depreciation rate is 25% for each project. 2. Table Project 1 Years Project 2 Years 2 0 2 0 Barnings Cashflows 4 60 120 180...
3. Consider Table 2. Victoria Way Inc. is considering investing in Projects 1 and 2. The...
3. Consider Table 2. Victoria Way Inc. is considering investing in Projects 1 and 2. The initial cost of Project l is €8,000 and E3,000 for Project 2. Each project lasts four years. Straight-line depreciation method is used. The minimum accounting rate of return is 10%. The discount rate is 10% for Project 1 and 20% for Project 2, and the depreciation rate is 25% for each project. NWC is "Net Working Capital". PROJECT 2 0 1,5001,5001,5001,500 16,000 16,000 16,00016,000...
3. Consider the information in Table 2. Sports Bulletin Plc. is considering investing in two projects,...
3. Consider the information in Table 2. Sports Bulletin Plc. is considering investing in two projects, A and B. The initial outlay and annual cash flows are shown in Table 2. Straight-line depreciation method is used. The minimum accounting rate of return is 15%. The discount rate is 10%, and the depreciation rate is 25%. The minimum acceptable pavback period is 3 vears. For each project, the change in net working capital is zero in each vear, Both proiects are...
Consider the following two independent investment projects: Cash flows of project A: 0 1 2 3...
Consider the following two independent investment projects: Cash flows of project A: 0 1 2 3 T + + 100 -130 50 5 Cash flows of project B: 0 2 3 4 5 + + + + 다. -130 90 40 40 40 40 If management only accepts projects that pay back in 3 years or less, according to the discounted payback period rule, which projects will be selected? Use a discount rate of 10%.
28. Romo Company is considering investing in one of the following two projects: Annual Cash Inflows...
28. Romo Company is considering investing in one of the following two projects: Annual Cash Inflows Year Project A S 1,000 2.000 2.000 Project B 3.000 1,000 1.000 1.000 6,000 Total $ 6,000 Required: Show your work if you want partial credit. Total points: 30 1) Which project is more desirable strictly in terms of cash inflows? Why? Write a short sentence to explain your opinion Which Project? iw: 2) Compute the present value of each project's cash inflows assuming...
Tesla is considering investing in Project M. The projects generate the following cash flows: Year 0...
Tesla is considering investing in Project M. The projects generate the following cash flows: Year 0 Year 1 Year 2 Project M -464 247 330 The MARR is 10% per year, compounded annually. Compute the Internal Rate of Return (IRR) of the project. (note: if your answer is 17.25% then write 17.25 as your answer, not 0.1725)
5.29: Consider the independent investment projects in Table P5.29. Compute the project worth of each project...
5.29: Consider the independent investment projects in Table P5.29. Compute the project worth of each project at the end of six years with variable MARRs as follows: 10% for n=0 to n = 3 and 15% for n = 4 to n = 6. Table P5.29 Project Cash Flows А -$800 -$500 $200 150 150 -40 0 - N ~ 150 150 -60 350 150 -140 -200 100 + Do 500 100 400 Note: Show all calculations to receive credit
14) Cedric is considering between two mutually exclusive projects. The following table gives the cash flows...
14) Cedric is considering between two mutually exclusive projects. The following table gives the cash flows of each project: 0 1 2 3 4 A -$50 25 20 20 15 B -$100 20 40 50 60 a. If your discount rate is 6%, what are the NPVs of the two projects? b. What are the IRRs of the two projects? c. Why do IRR and NPV rank the two projects differently? NPV IRR
Suppose your firm is considering investing in a project with the cash flows shown below, that...
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 13 percent, and that the maximum
allowable payback and discounted payback statistic for the project
are 2 and 3 years, respectively.
Use the payback decision rule to evaluate this project; should
it be accepted or rejected?
Suppose your firm is considering investing in a project with the cash flows shown below, that...
Quantitative Problem: Bellinger Industries is considering two projects for inclusion in its capital budget, and you...
Quantitative Problem: Bellinger Industries is considering two projects for inclusion in its capital budget, and you have been asked to do the analysis. Both projects' after-tax cash flows are shown on the time line below. Depreciation, salvage values, net operating working capital requirements, and tax effects are all included in these cash flows. Both projects have 4-year lives, and they have risk characteristics similar to the firm's average project. Bellinger's WACCC is 9 %. 0 1 2 4 Project A...
Consider Table 1. Public Life Inc. is considering investing in projects 1 and 2. The initial cost of project 1 is 10,000 and e3,000 for project 2. Each project lasts four years. Straight-line depreciation method is used The minimum accounting rate of return is 10%. The discount rate is 10% for both projects, and the depreciation rate is 25% for each project. 2. Table Project 1 Years Project 2 Years 2 0 2 0 Barnings Cashflows 4 60 120 180...
3. Consider Table 2. Victoria Way Inc. is considering investing in Projects 1 and 2. The initial cost of Project l is €8,000 and E3,000 for Project 2. Each project lasts four years. Straight-line depreciation method is used. The minimum accounting rate of return is 10%. The discount rate is 10% for Project 1 and 20% for Project 2, and the depreciation rate is 25% for each project. NWC is "Net Working Capital". PROJECT 2 0 1,5001,5001,5001,500 16,000 16,000 16,00016,000...
3. Consider the information in Table 2. Sports Bulletin Plc. is considering investing in two projects, A and B. The initial outlay and annual cash flows are shown in Table 2. Straight-line depreciation method is used. The minimum accounting rate of return is 15%. The discount rate is 10%, and the depreciation rate is 25%. The minimum acceptable pavback period is 3 vears. For each project, the change in net working capital is zero in each vear, Both proiects are...
Consider the following two independent investment projects: Cash flows of project A: 0 1 2 3 T + + 100 -130 50 5 Cash flows of project B: 0 2 3 4 5 + + + + 다. -130 90 40 40 40 40 If management only accepts projects that pay back in 3 years or less, according to the discounted payback period rule, which projects will be selected? Use a discount rate of 10%.
28. Romo Company is considering investing in one of the following two projects: Annual Cash Inflows Year Project A S 1,000 2.000 2.000 Project B 3.000 1,000 1.000 1.000 6,000 Total $ 6,000 Required: Show your work if you want partial credit. Total points: 30 1) Which project is more desirable strictly in terms of cash inflows? Why? Write a short sentence to explain your opinion Which Project? iw: 2) Compute the present value of each project's cash inflows assuming...
Tesla is considering investing in Project M. The projects generate the following cash flows: Year 0 Year 1 Year 2 Project M -464 247 330 The MARR is 10% per year, compounded annually. Compute the Internal Rate of Return (IRR) of the project. (note: if your answer is 17.25% then write 17.25 as your answer, not 0.1725)
5.29: Consider the independent investment projects in Table P5.29. Compute the project worth of each project at the end of six years with variable MARRs as follows: 10% for n=0 to n = 3 and 15% for n = 4 to n = 6. Table P5.29 Project Cash Flows А -$800 -$500 $200 150 150 -40 0 - N ~ 150 150 -60 350 150 -140 -200 100 + Do 500 100 400 Note: Show all calculations to receive credit
14) Cedric is considering between two mutually exclusive projects. The following table gives the cash flows of each project: 0 1 2 3 4 A -$50 25 20 20 15 B -$100 20 40 50 60 a. If your discount rate is 6%, what are the NPVs of the two projects? b. What are the IRRs of the two projects? c. Why do IRR and NPV rank the two projects differently? NPV IRR
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 13 percent, and that the maximum
allowable payback and discounted payback statistic for the project
are 2 and 3 years, respectively.
Use the payback decision rule to evaluate this project; should
it be accepted or rejected?
Suppose your firm is considering investing in a project with the cash flows shown below, that...
Quantitative Problem: Bellinger Industries is considering two projects for inclusion in its capital budget, and you have been asked to do the analysis. Both projects' after-tax cash flows are shown on the time line below. Depreciation, salvage values, net operating working capital requirements, and tax effects are all included in these cash flows. Both projects have 4-year lives, and they have risk characteristics similar to the firm's average project. Bellinger's WACCC is 9 %. 0 1 2 4 Project A...
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