4. Recalculate the NPV assuming BBS's cost of capital is 15 percent. 5. Based on your calculation of NPV, what would you estimate the project's internal rate of retur to be?
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- Investment required Present value of cash inflows - Net present value Life of the project. Internal rate of return 1 Required 1 $ (270,000) 336,140 $ 66,140 Project 6 years 18% Complete this question by entering your answers in the tabs below. Required 2 Compute the profitability index for each investment project. Note: Round your answers to 2 decimal places. Profitability Index 2 $ (450,000) 522,970 $ 72,970 Project Number 3 years 19% The net present values above have been computed using a 10% discount rate. Limited funds are available for investment, so the company can't accept all of the available projects. Required: 1. Compute the profitability index for each investment project. 2. Rank the four projects according to preference, in terms of net present value, profitability index, and internal rate of return. 3 $ (360,000) 433,400 $ 73,400 12 years. 14 $ (480,000) 567,270 $ 87,270 6 years 16%Average rate of return The following data are accumulated by Patterson Inc. in evaluating two competing capital investment proposals: Amount of investment Useful life Feedback Estimated residual value $6,760 $6,600 Estimated total income over the useful life Determine the expected average rate of return for each project. Round your answers to one decimal place. Project C Project T 4.5 X % Project C Project T $52,000 $24,000 4 years 8 X % years 0 0+ Consider the following three mutually exclusive projects: Cash flow - Project A Year 0 1 2 3 4 5 IRR PV of all positive cash flows - use Excel function NPV NPV Best project using IRR decision rule Best project using NPV decision rule Best project using both decision rules -187 500 25 000 70 000 70 000 70 000 30 000 Cash flow- Project B -45 000 17 000 11 000 17 000 11 000 17 000 Cash flow - Project C -128 000 27 000 37 000 47 000 57 000 31 000 a) Calculate the IRR of each of these projects. Using the IRR decision rule, which project should the company accept? b) If the required rate of return is 13%, calculate the NPV of each of these projects. Which project will the company choose if it applies the NPV decision rule? c) Based on your answers in a) and b) Which project the company will finally choose?
- Question The following economical indictors are referring to types of project (A and B). Answer the following points according to these given indictors in the tables. project A:r=8% project B: r=8% year cash flow (CF) year cash flow (CF) 0 -598 0 -384 1 110 1 105 2 170 2 105 3 210 3 95 4 320 4 118 A) If you are aware that( r%) percentages are various for different reasons to be (10% and 20%). So determine level of NPV during your analysis procedures for whole the mentioned cases of (% r) for each project? B) Which one of the mentioned project are more economically by using concept of IRR and take the range of (% r) between (9% to %25) for supporting your answers? C) Drawing out all the levels of various of the project for each cases of (r %) which given initially in point (A) above. D) Give clear justification about any of the above project more feasible?Average rate of return The following data are accumulated by Patterson Inc. in evaluating two competing capital investment proposals: Amount of investment Useful life Estimated residual value Estimated total income over the useful life Project C Project T $24,000 $40,000 4 years 9 years 0 0 $3,120 $20,700 Determine the expected average rate of return for each project. Round your answers to one decimal place. Project C X % Project T X %Average Rate of Return The following data are accumulated by Watershed Inc. in evaluating two competing capital investment proposals: Amount of investment Useful life Estimated residual value Estimated total income over the useful life Project A Project Z $80,000 $64,000 4 years 9 years 0 0 $6,400 $20,160 Determine the expected average rate of return for each project. Round your answers to one decimal place. Project A Project Z Feedback Check My Work X % X %
- Information for two alternative projects involving machinery investments follows: Project 1 Initial investment Salvage value Annual income $ (128,000) Ө Project 2 $ (98,000) 18,000 14,080 11,600 a. Compute accounting rate of return for each project. b. Based on accounting rate of return, which project is preferred? Complete this question by entering your answers in the tabs below. Required A Required B Compute accounting rate of return for each project. Project 1 Project 2 Numerator: Accounting Rate of Return Denominator: Required A Required B Based on accounting rate of return, which project is preferred? Based on accounting rate of return, is preferred. = Accounting rate of returnBased on the parameters calculated, should this project goes ahead? Give your reasons for your answer. Economic Parameters Base case Project IRR Equity IRR NPV($millions)@12% Capital Expenditure($million) PayBack period (Year) WACC (Based on 75/25) 13.68 15.89 9,172,880 (85,000,000) 8.92 0.1246Net Present Value Method, Internal Rate of Return Method, and Analysis for a Service Company The management of Advanced Alternative Power Inc. is considering two capital investment projects. The estimated net cash flows from each project are as follows: Biofuel Equipment Year 1 2 3 4 Year 1 2 The wind turbines require an investment of $513,900, while the biofuel equipment requires an investment of $1,093,320. No residual value is expected from either project. Present Value of an Annuity of $1 at Compound Interest 12% 0.893 1.690 2.402 3.037 3.605 3 4 5 Wind Turbines 6 7 8 9 10 Required: $180,000 180,000 180,000 180,000 6% 0.943 1.833 2.673 3.465 4.212 4.917 5.582 6.210 6.802 7.360 10% 0.909 1.736 2.487 3.170 3.791 4.355 4.868 5.335 $360,000 360,000 360,000 360,000 5.759 6.145 4.111 4.564 4.968 5.328 5.650 15% 0.870 1.626 2.283 2.855 3.353 3.785 4.160 4.487 4.772 5.019 20% 0.833 1.528 2.106 2.589 2.991 3.326 3.605 3.837 4.031 4.192 1a. Compute the net present value for each project. Use…
- You are given the following financial information related to a capital investment project. What is the project's Year 1 Net Cash Flow? Sales revenues Depreciation Other operating costs Interest Exp Tax rate WACC Select one: a. $8,580 b. $8,900 c. $9,350 d. $9,463 e. $9,832 $22,250 $8,000 $12,000 $800 40.0% 12.0%4. Consider the investment projects given in the following table. n 0 1 2 Project 1 - $1,500 $700 $2,500 Net Cash Flow Project 2 - $5,000 $7,500 $600 Project 3 -$2,200 $1,600 $2,000 Assume that MARR=15% and a financing rate of 12%. a. Compute the IRR for each project. b. On the basis of the IRR criterion, if the three projects are mutually exclusive investments, which project should be selected?You are given the following data for a project that is to be evaluated using the APV method. Year EBIT CAPEX 0 O $201.765 O $193,822 O $185,617 O $222,872 O $213,918 1 $127.000 $60,000 2 Depreciation Increase in NWC Year-end net debt $80,000 Cost of net debt = 8% Unlevered cost of capital = 11.8% Corporate tax rate = 30% Calculate the total value of the project at t = 0. using the APV method. $72,000 $50,000 $100,000 $133,000 $40,000 $80,000 $60,000 $140,000 3 $138.500 $10,000 $84,000 $30,000 $140,000
