Capital Budgeting Analysis : A firm is planning a new project that is projected to yield cash flo...
Capital Budgeting Analysis :
A firm is planning a new project that is projected to yield cash flows of - $595,000 in Year 1, $586,000 per year in Years 2 through 5, and $578,000 in Years 6 through 11. This investment will cost the company $2,580,000 today (initial outlay). We assume that the firm's cost of capital is 11%.
(1) Draw a timeline to show the cash flows of the project.
(2) Compute the project’s payback period, net present value (NPV), profitability index (PI), internal rate of return (IRR), and modified internal rate of return (MIRR).
(3) Discuss whether the project should be taken.
Homework Answers
Add Answer to:
Capital Budgeting Analysis : A firm is planning a new project that is projected to yield cash flo...
A firm is planning a new project that is projected to yield cash flows of -$515,000...
A firm is planning a new project that is projected to yield cash flows of -$515,000 in Year 1, $586,000 per year in Years 2 through 3, and $678,000 in Years 4 through 6, and $728,000 in Years 7 through 10. This investment will cost the company $2,780,000 today (initial outlay). We assume that the firm's cost of capital is 9.65%. (1) Draw a time line to show the cash flows of the project. (2) Compute payback period, net present...
Capital Budgeting Analysis: The MCSL Corp. is planning a new investment project which is expected to...
Capital Budgeting Analysis: The MCSL Corp. is planning a new investment project which is expected to yield cash inflows of $180,000 per year in Years 1 through 3, $225,000 per year in Years 4 through 7, and $185,000 in Years 8 through 10. This investment will cost the company $880,000 today (initial outlay). We assume that the firm's cost of capital is 7.8%. (1) Draw a time line to show the cash flows of the project. 2) Compute the project’s...
Capital Budgeting: Homework 1. Waste Management has a WACC of 12 percent and it is considering a project with a cost of...
Capital Budgeting: Homework 1. Waste Management has a WACC of 12 percent and it is considering a project with a cost of $52,125. The project’s expected net cash inflows are $12,000 per year for 8 years. What is the project’s payback period? What is the project’s net present value (NPV)? What is the profitability index? What is the project’s internal rate of return (IRR)? What is the project’s modified internal rate of return (MIRR)?
You are a financial analyst for the Brittle Company. The director of capital budgeting has asked...
You are a financial analyst for the Brittle Company. The director of capital budgeting has asked you to analyze two proposed capital investments: Projects X and Y. Each project has a cost of $10,000, and the cost of capital for each is 12%. The projects' expected net cash flows are shown in the table below. Expected Net Cash Flows Year Project X Project Y 0 – $10,000 – $10,000 1 6,500 3,500 2 3,000 3,500 3 3,000 3,500 4 1,000...
Alice Werd is a new project analyst; he is working on capital budgeting analysis of two...
Alice Werd is a new project analyst; he is working on capital budgeting analysis of two mutually exclusive projects. The followings are the cash flow forecasts for both the projects years Project A Expected Cash flows Project B Expected Cash flows 0 (1000,000) ($900,000) 1 50000 650,000 2 200,000 650,000 3 600,000 550,000 4 1000,000 300,000 5 1500,000 100,000 The following metrics presents the key information based on capital budgeting indicators. For purposes of analysis, he plans to use a...
Net Present Value and Other Capital Budgeting Measures 4. Compute the Net Present Value (NPV), Internal...
Net Present Value and Other Capital Budgeting Measures 4. Compute the Net Present Value (NPV), Internal Rate of Return (IRR), Profitability Index (PI), and Payback statistic for the project with the cash flows given below. Recommend whether the firm should accept or reject the project with the cash flows shown below if the appropriate cost of capital is 12 percent and the maximum allowable payback is 4 years. Time: Cash flow: 0 -2,100 1 350 2 700 3 800 4...
KEY TERMS Define the following terms: a. Capital budgeting; strategic business plan b. Net present value...
KEY TERMS Define the following terms: a. Capital budgeting; strategic business plan b. Net present value (NPV) c. Internal rate of return (IRR) d. NPV profile; crossover rate e. Mutually exclusive projects; independent projects f. Nonnormal cash flows; normal cash flows; multiple IRRS g. Modified internal rate of return (MIRR) h. Payback period; discounted payback CAPITAL BUDGETING CRITERIA You must analyze two projects, X and Y. Each project costs $10,000, and the firm's WACC is 12%. The expected cash flows...
The IRR evaluation method assumes that cash flows from the project are reinvested at a rate...
The IRR evaluation method assumes that cash flows from the project are reinvested at a rate equal to the project’s IRR. However, in reality, the reinvested cash flows may not necessarily generate a return equal to the IRR. Thus, using the modified IRR approach, you can make a more reasonable estimate of a project’s rate of return than the project’s IRR can. Consider the following situation: Green Caterpillar Garden Supplies Inc. is analyzing a project that requires an initial investment...
Assignment: Capital Budgeting Decisions Your company is considering undertaking a project to expand an existing product...
Assignment: Capital Budgeting Decisions Your company is considering undertaking a project to expand an existing product line. The required rate of return on the project is 8% and the maximum allowable payback period is 3 years. time 0 1 2 3 4 5 6 Cash flow $ 10,000 2,400 4,800 3,200 3,200 2,800 2,400 Questions Evaluate the project using each of the following methods. For each method, should the project be accepted or rejected? Justify your answer based on the...
Please use Excel to solve! Ne Present Value and Other Capital Budgeting Measures 5. Consider a...
Please use Excel to solve!
Ne Present Value and Other Capital Budgeting Measures 5. Consider a project that has the following cash flows: initial cash flow (t-0) --$100,000; cash flows years 1 to 5 (t-1-5) - $10,000 per year, cash flows years 6 to 10 (t-6-10) - $20,000 per year. If the required return on the project is 6%, calculate the following: a. Internal Rate of Return (IRR)? b. Net Present Value (NPV)? c. Profitability index (PI)? d. Payback period?
Net Present Value and Other Capital Budgeting Measures 4. Compute the Net Present Value (NPV), Internal Rate of Return (IRR), Profitability Index (PI), and Payback statistic for the project with the cash flows given below. Recommend whether the firm should accept or reject the project with the cash flows shown below if the appropriate cost of capital is 12 percent and the maximum allowable payback is 4 years. Time: Cash flow: 0 -2,100 1 350 2 700 3 800 4...
KEY TERMS Define the following terms: a. Capital budgeting; strategic business plan b. Net present value (NPV) c. Internal rate of return (IRR) d. NPV profile; crossover rate e. Mutually exclusive projects; independent projects f. Nonnormal cash flows; normal cash flows; multiple IRRS g. Modified internal rate of return (MIRR) h. Payback period; discounted payback CAPITAL BUDGETING CRITERIA You must analyze two projects, X and Y. Each project costs $10,000, and the firm's WACC is 12%. The expected cash flows...
Please use Excel to solve!
Ne Present Value and Other Capital Budgeting Measures 5. Consider a project that has the following cash flows: initial cash flow (t-0) --$100,000; cash flows years 1 to 5 (t-1-5) - $10,000 per year, cash flows years 6 to 10 (t-6-10) - $20,000 per year. If the required return on the project is 6%, calculate the following: a. Internal Rate of Return (IRR)? b. Net Present Value (NPV)? c. Profitability index (PI)? d. Payback period?
Most questions answered within 3 hours.
-
Assume a muscle has a PCSA = 20 cm2 and Lo = 12 cm. Assume it...
asked 54 minutes ago -
What is the yield to maturity of a ten-year, $1,000 bond with a
5.2% coupon rate...
asked 1 hour ago -
A mass m = 5 kg is tied on one end of a rope and is...
asked 1 hour ago -
The Average sales price of single-family houses in Charlotte is
$210,000 with a standard deviation of...
asked 1 hour ago -
Target Costing
Laser Impressions, Inc., manufactures color laser printers.
Model J20 presently sells for $225 and...
asked 1 hour ago -
a bottle cap manufacturer with four machines and six operators
wants to see if variation in...
asked 2 hours ago -
State Farm Insurance studies show that in Colorado, 55% of the
auto insurance claims submitted for...
asked 3 hours ago -
Complete the following reactions which form ethers (A
and B) and cyclic ethers (C-E) as major...
asked 3 hours ago -
in a perfectly elastic collision what is the velocity of ball A
if the original direction...
asked 4 hours ago -
PLEASE ANSWER ALL
1) The pressure of the atmosphere decreases with increasing
altitude in the
Choose...
asked 4 hours ago -
A simple random sample of 25,000 individuals are surveyed in
order to determine the prevalence of...
asked 4 hours ago -
People who do very detailed work close up, such as jewelers,
often can see objects clearly...
asked 4 hours ago