Homework Answers
Return on Invested Capital (RIC) is nothing but the IRR
IRR syntax in excel: = IRR (.)
We calculate it using excel:
| N | Net Cashflow | Discount Factor | Discounted cashflow |
| 0 | -5000 | 1 | -5000 |
| 1 | -7000 | 1.161005738 | -6029.255301 |
| 2 | -1000 | 1.347934324 | -741.8759078 |
| 3 | 10000 | 1.564959484 | 6389.941785 |
| 4 | 10000 | 1.816926941 | 5503.798625 |
| 5 | -20000 | 2.109462604 | -9481.087724 |
| 6 | 10000 | 2.449098187 | 4083.135601 |
| 7 | 15000 | 2.843417049 | 5275.342921 |
| IRR = | 16.10% | 0 |
To check if the answer is correct, we can calculate the discounted cashflows and sum them. We observe that we get net cashflow of zer. Hence 16.10% is RIC
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Please answer each part clearly
3. Calculate the RIC Assume the project cash flow below. The...
Option #1: Capital Rationing Table with Cash Flows for 5 projects. Project A Project B Project...
Option #1: Capital Rationing Table with Cash Flows for 5 projects. Project A Project B Project C Project D Project E Initial Investment -$100,000 -$25,000 -$40,000 -$10,000 -$150,000 Year 1 $50,000 $15,000 $20,000 $7,000 $100,000 Year 2 $40,000 $10,000 $15,000 $4,000 $25,000 Year 3 $20,000 $5,000 $5,000 $2,000 $10,000 Year 4 $10,000 $1,000 $5,000 $1,000 $10,000 Year 5 $1,000 $10,000 Year 6 $1,000 $10,000 Calculate the IRR for each of the projects presented. Rank the projects based on their IRR....
5. Consider an investment project whose cash flows are given in Table below. Calculate the MIRR assuming that all i...
5. Consider an investment project whose cash flows are given in Table below. Calculate the MIRR assuming that all inflows and outflows are compounded and discounted at MARR = 15%. Is this a good investment? n 0 Net Cash flow -$5,000 $12,000 -$40,000 -20,000 2 3
Consider the three projects with cash flows shown in the table below. If these projects are...
Consider the three projects with cash flows shown in the table below. If these projects are mutually exclusive, which project would you select? Support your choice using a rate of return analysis approach. Show your work and if necessary you MUST use an RIC method to find the true IRR. n Option A Option B Option C 0 $7,000 $6,250 $12,500 1 9,500 5,500 7,531 -200 3,500 9,156 33.58% 30.81% 20.86% You may assume the following in your work: •...
1. Given the following set of cash flows for a project, calculate the NPV, PI, IRR,...
1. Given the following set of cash flows for a project, calculate the NPV, PI, IRR, MIRR, Payback, Discounted Payback and Accounting Rate of Return. Assume a cost of capital of 10%. Assuming that this is an independent project, should the project be accepted? Why or why not? (20 pts.) Year Cash Flow Net Profit Depreciation 0 -$125,000 1 $22,000 $15,000 $10,000 2 $58,000 $43,000 $25,000 3 -$30,000 $24,000 $21,000 4 $35,000 $28,000 $18,000 5 $28,000 $20,000 $15,000 6 $60,000 ...
Solve Part C: WN -os Net Cash Flow Project A - $115,000 40,000 40,000 150,000 Project...
Solve Part C:
WN -os Net Cash Flow Project A - $115,000 40,000 40,000 150,000 Project B - $100,000 30,000 30,000 160,000 Consider two investments A and B with the sequences of cash flows given in the table below. Click the icon to view the cash flows for the projects. (a) Compute the IRR for each investment. The rate of return for Project A is 33.73 %. (Round to one decimal place.) The rate of return for Project B is...
everything the same but project G’s year 2 cash flow is $20,000 and H’s year 2...
everything the same but project G’s year 2 cash flow is $20,000
and H’s year 2 cash flow is $20,000. The cost of capital is
12%
Show your work
286 PART 4: CAPITAL EXPENDITURE ANALYSIS istics: 13-3 Two mutually exclusive projects have the following characteristic 2 9000 Year 3 $20,000 Year 4 $5,000 Project Year 0 Year 1 Year 2 Year 3 -$30,000 $15,000 $10,000 $20,000 - 20,000 18,000 10,000 The cost of capital is 10 perce of capital is...
Determine Value of Investment Nu Things, Inc., is considering investing in a business venture with the...
Determine Value of Investment
Nu Things, Inc., is considering investing in a business venture with the following anticipated cash flow results: EOY Cash Flow 0 $70,000 $20,000 $19,000 $18,000 $17,000 $16,000 $15,000 $14,000 $13,000 $12,000 $11,000 $10,000 $9,000 $8,000 $7,000 $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 Assume MARR is 20 percent per year. Based on an internal rate of return analysis:
Senior management asks you to recommend a decision on which project(s) to accept based on the...
Senior management asks you to recommend a decision on which project(s) to accept based on the cash flow forecasts provided.The firm uses a 3-year cutoff when using the payback method. The hurdle rate used to evaluate capital budgeting projects is 15%. Assume the projects are mutually exclusive and answer the following: Which project(s) would you accept based on the payback criterion? Which projects would you accept based on the IRR criterion? Which projects would you accept based on the NPV...
Please help thank you! Fuzzy Button Clothing Company is analyzing a project that requires an initial...
Please help thank you!
Fuzzy Button Clothing Company is analyzing a project that requires an initial investment of $450,000. The project's expected cash flows are: Year Year 1 Year 2 Year 3 Year 4 Cash Flow $325,000 -125,000 450,000 450,000 Fuzzy Button Clothing Company's WACC is 9%, and the project has the same risk as the firm's average project. Calculate this project's modified internal rate of return (MIRR): O 23.88% 20.11% 25.14% 28.91% If Fuzzy Button Clothing Company's managers select...
Comparing all methods. Risky Business is looking at a project with the following estimated cash flow:....
Comparing all methods. Risky Business is looking at a project
with the following estimated cash flow:. Risky Business wants to know
the payback period, NPV, IRR, MIRR, and PI of this project. The
appropriate discount rate for the project is 12%.
If the cutoff period is 66 years for major projects, determine
whether the management at Risky Business will accept or reject the
project under the five different decision models.
What is the payback period for the new project at...
5. Consider an investment project whose cash flows are given in Table below. Calculate the MIRR assuming that all inflows and outflows are compounded and discounted at MARR = 15%. Is this a good investment? n 0 Net Cash flow -$5,000 $12,000 -$40,000 -20,000 2 3
Consider the three projects with cash flows shown in the table below. If these projects are mutually exclusive, which project would you select? Support your choice using a rate of return analysis approach. Show your work and if necessary you MUST use an RIC method to find the true IRR. n Option A Option B Option C 0 $7,000 $6,250 $12,500 1 9,500 5,500 7,531 -200 3,500 9,156 33.58% 30.81% 20.86% You may assume the following in your work: •...
Solve Part C:
WN -os Net Cash Flow Project A - $115,000 40,000 40,000 150,000 Project B - $100,000 30,000 30,000 160,000 Consider two investments A and B with the sequences of cash flows given in the table below. Click the icon to view the cash flows for the projects. (a) Compute the IRR for each investment. The rate of return for Project A is 33.73 %. (Round to one decimal place.) The rate of return for Project B is...
everything the same but project G’s year 2 cash flow is $20,000
and H’s year 2 cash flow is $20,000. The cost of capital is
12%
Show your work
286 PART 4: CAPITAL EXPENDITURE ANALYSIS istics: 13-3 Two mutually exclusive projects have the following characteristic 2 9000 Year 3 $20,000 Year 4 $5,000 Project Year 0 Year 1 Year 2 Year 3 -$30,000 $15,000 $10,000 $20,000 - 20,000 18,000 10,000 The cost of capital is 10 perce of capital is...
Determine Value of Investment
Nu Things, Inc., is considering investing in a business venture with the following anticipated cash flow results: EOY Cash Flow 0 $70,000 $20,000 $19,000 $18,000 $17,000 $16,000 $15,000 $14,000 $13,000 $12,000 $11,000 $10,000 $9,000 $8,000 $7,000 $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 Assume MARR is 20 percent per year. Based on an internal rate of return analysis:
Please help thank you!
Fuzzy Button Clothing Company is analyzing a project that requires an initial investment of $450,000. The project's expected cash flows are: Year Year 1 Year 2 Year 3 Year 4 Cash Flow $325,000 -125,000 450,000 450,000 Fuzzy Button Clothing Company's WACC is 9%, and the project has the same risk as the firm's average project. Calculate this project's modified internal rate of return (MIRR): O 23.88% 20.11% 25.14% 28.91% If Fuzzy Button Clothing Company's managers select...
Comparing all methods. Risky Business is looking at a project
with the following estimated cash flow:. Risky Business wants to know
the payback period, NPV, IRR, MIRR, and PI of this project. The
appropriate discount rate for the project is 12%.
If the cutoff period is 66 years for major projects, determine
whether the management at Risky Business will accept or reject the
project under the five different decision models.
What is the payback period for the new project at...
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