Fijisawa, Inc. is considering a major expansion of its product line and has estimated the following cash flows associated with such an expansion. The initial outlay would be $10 comma 800 comma 00010,800,000, and the project would generate cash flows of $1 comma 250 comma 0001,250,000 per year for 20 years. The appropriate discount rate is 9.09.0 percent. a. Calculate the NPV. b. Calculate the PI. c. Calculate the IRR. d. Should this project be accepted? Why or why not?
Initial Outlay = $10,800,000
Annual Cash Inflows = $1,250,000
Time = 20 years
Discount Rate = 9%
a.NPV = present value of cash inflows – present value of cash outflows
= 1,250,000*PVAF(9%, 20 years) – 10,800,000
= 1,250,000*9.1285 – 10,800,000
= $610,625
b.Profitability Index = Present value of Cash Inflows/Initial Investment
= $11,410,625/10,800,000
= 1.056
c.IRR is the rate at which NPV = 0
Let r be the IRR
0 = 1,250,000*PVAF(r%, 20 years) – 10,800,000
PVAF(r%, 20 years) = 8.64
PVAF(9%, 20 years) = 9.1285
PVAF(10%, 20 years) = 8.5136
Using interpolation, r i.e. IRR = 9% + (9.1285-8.64)/(9.1285-8.5136)
= 9.79% (approx.)
d.The project should be accepted since the project provides higher return than the discount rate.
Fijisawa, Inc. is considering a major expansion of its product line and has estimated the following...
Fijisawa Inc. is considering a major expansion of its product line and has estimated the following cash flows associated with such an expansion. The initial outlay would be $1,900,000, and the project would generate incremental free cash flows of $500,000 per year for 7 years. The appropriate required rate of return is 6 percent. a. Calculate the NPV b. Calculate the PI. c. Calculate the IRR. d. Should this project be accepted?
(NPV, PI, and IRR calculations) Fijisawa Inc. is considering a major expansion of its product line and has estimated the following cash flows associated with such an expansion. The initial outlay would be $1,850,000 , and the project would generate incremental free cash flows of $550,000 per year for 6 years. The appropriate required rate of return is 9% a. Calculate the NPV. b. Calculate the PI. c. Calculate the IRR. d. Should this project be accepted?
(NPV,PI, and IRR calculations) Fijisawa Inc. is considering a major expansion of its product line and has estimated the following cash flows associated with such an expansion. The initial outlay would be $1,850,000, and the project would generate incremental free cash flows of $700,000 per year for 7 years. The appropriate required rate of return is 8 percent. a. Calculate the NPV. b. Calculate the PI. c. Calculate the IRR. d. Should this project be accepted? a.What is the project's...
(NPV, PI, and IRR calculations) Fijisawa Inc. is considering a major expansion of its product line and has estimated the following cash flows associated with such an expansion. The initial outlay would be $1,850,000, and the project would generate incremental free cash flows of $500,000 per year for 55 years. The appropriate required rate of return is 77 percent. a. Calculate the NPV. b. Calculate the PI. c. Calculate the IRR. d. Should this project be accepted? a.What is the...
5. The Fijisawa Inc. is considering a major expansion of its product line and has estimated the following free cash flows associated with such an expansion. The initial outlay would be $1,950,000, and the project would generate incremental free cash flows of $450,000 per year for 6 years. The appropriate required rate for return is 9%. a.) Calculate the NPV. b.) Calculate the Profitability Index (P) c.) Calculate the IRR. d.) Should this project be accepted Explain your answer (Please...
Related to Checkpoint 11.1 and Checkpoint 11.4)(Calculating NPV, PI, and IRR) Fijisawa, Inc. is considering a major expansion of its product line and has estimated the following cash flows associated with such an expansion. The initial outlay would be $10,600,000, and the project would generate cash flows of 51.240,000 per year for 20 years. The appropriate discount rate is 8.6 percent. a. Calculate the NPV. b. Calculate the PL c. Calculate the IRR d. Should this project be accepted? Why...
(NPV, PI, and IRR calculations) Fijisawa Inc. is considering a major expansion of its product line and has estimated the following free cash flows associated with such an expansion. The initial outlay would be $1,800,000, and the project would generate incremental free cash flows of $600,000 per year for 5 years. The appropriate required rate of return is 8 percent. a. Calculate the NPV. b. Calculate the Pl. c. Calculate the IRR. d. Should this project be accepted? a. What...
(Related to Checkpoint 11.1 and Checkpoint 11.4) (Calculating NPV, PI, and IRR) Fijisawa, Inc. is considering a major expansion of its product line and has estimated the following cash flows associated with such an expansion. The initial outlay would be $10,800,000, and the project would generate cash flows of $1,250,000 per year for 20 years. The appropriate discount rate is 9.0 percent. a. Calculate the NPV. b. Calculate the PI. c. Calculate the IRR. d. Should this project be accepted?...
please include parts a - d , thanks (NPV, PI, and IRR calculations) Fijisawa Inc. is considering a major expansion of its product line and has estimated the following cash flows associated with such an expansion. The initial outlay would be $2,000,000, and the project would generate incremental free cash flows of $550,000 per year for 6 years. The appropriate required rate of return is 9 percent. a. Calculate the NPV b. Calculate the Pl c. Calculate the IRR. d....
(NPV, Pl, and IRR calculations) Fijsawa Inc. is considering a major expansion of its product line and has estimated the following cash flows associated with such an expansion. The initial ouay would be $1,800,00, and the project would generate icrtal fee cash flows of $500,000 per year tor 7 years. the appropriate required rate of retum is 9 percent aCalculate the NPV b. Calculate the Pl c. Calculate the IRR. d. Should this project be accepted? a. What is the...