Answered: Problem 19-14 APV Consider a project… | bartleby

International Financial Management

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter16: Country Risk Analysis

Section: Chapter Questions

Problem 29QA

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cing and Valuation Ch 19
3
Book
Rough Waters Ahead by....
erences
Problem 19-14 APV
Base-case NPV
Rough Waters Ahead Tru....
Marlon arango presentati.....
Adjusted present value
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b. What is its APV if the firm borrows 32% of the project's required investment?
IMP The US Economy's Inflati....
Consider a project lasting one year only. The initial outlay is $1,000 and the expected inflow is $1,220. The opportunity cost of capital is
r= 0.22. The borrowing rate is rp=0.12, and the tax shield per dollar of interest is Tc = 0.21. (Do not round Intermediate
calculations. Round your answers to 2 decimal places. Leave no cells blank - be certain to enter "0" wherever required.)
a. What is the project's base-case NPV?
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.5ו Comparing Investment Criteria. onsiuer uie 1onOwing two inutuany exclusive projects: Cash Flow (B) 1TT Year Cash Flow (A) S415,000 -$3,500 49,000 1,920 57.000 1,390 74,000 1,420 530,000 1,050 4 Whichever project you choose, if any, you require a 13 percent return on your investment. a. If you apply the payback criterion, which investment will you choose? Why? b. If you apply the NPV criterion, which investment will you choose? Why? 8If you apply the IRR criterion, which investment will you choose? Why2 d. If you apply the profitability index criterion, which investment will you choose? Why? e. Based on your answers in (a) through (d), which project will you finally choose? Why?
ces A firm evaluates all of its projects by applying the IRR rule. Year Cash Flow 161,000 0 55,000 1 84,000 2 68,000 3 What is the project's IRR? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Internal rate of return % If the required return is 12 percent, should the firm accept the project?
Consider projects A and B with the following cash flows: C0 C1 C2 C3 A − $ 27 + $ 16 + $ 16 + $ 16 B − 52 + 27 + 27 + 27 a-1. What is the NPV of each project if the discount rate is 10%? (Do not round intermediate calculations. Round your answers to 2 decimal places.) a-2. Which project has the higher NPV? b-1. What is the profitability index of each project? (Do not round intermediate calculations. Round your answers to 2 decimal places.) b-2. Which project has the higher profitability index? c. Which project is most attractive to a firm that can raise an unlimited amount of funds to pay for its investment projects? d. Which project is most attractive to a firm that is limited in the funds it can raise?
Start with the partial model in the file Ch10 P23 Build a Model.xlsx on the textbooks Web site. Gardial Fisheries is considering two mutually exclusive investments. The projects expected net cash flows are as follows: a. If each projects cost of capital is 12%, which project should be selected? If the cost of capital is 18%, what project is the proper choice? b. Construct NPV profiles for Projects A and B. c. What is each projects IRR? d. What is the crossover rate, and what is its significance? e. What is each projects MIRR at a cost of capital of 12%? At r = 18%? (Hint: Consider Period 7 as the end of Project Bs life.) f. What is the regular payback period for these two projects? g. At a cost of capital of 12%, what is the discounted payback period for these two projects? h. What is the profitability index for each project if the cost of capital is 12%?
Comparing Investment Criteria [L01,2,3,5,7] Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 -$300,000 -$40,000 1 20,000 19,000 2 50,000 12,000 3 50,000 18,000 4 390,000 10,500 Whichever project you choose, if any, you require a 15 per cent return on your investment. a. If you apply the payback criterion, which will you choose? Why? b. If you apply the discounted payback criterion, which investment will you choose? Why? c. If you apply the NPV criterion, which investment will you choose? Why? d. If you apply the IRR criterion, which investment will you choose? Why? e. If you apply the profitability index criterion, which investment will you choose? Why? f. Based on your answers in (a) through (e), which project will you finally choose? Why? Please explain your calculations and conclusions
A firm evaluates all of its projects by applying the IRR rule. Cash Flow Year 0 1 2 3 147,000 69,000 70,000 54,000 What is the project's IRR? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Internal rate of return % If the required return is 16 percent, should the firm accept the project?
• Sienna plc has deduced the net present value of a potential investment project at two discount rates. The relevant data are as follows: Discount rate 20% 30% NPV (£000) 60 (120) What is the approximate internal rate of return of the project? A 16.7% B 23.3% C 26.6% D 33.3%
Clear my choice The total investment required for a project is estimated at OMR100, 000. The cash flows expected from project for the first four years are given below Year Project A Year 1 25,000 Year 2 38,500 Year 3 42,000 Year 4 48,000 What will be pay back period? 2.86 O b. B.23 c. 3.03 d. 2.63 All the options are wrong o search Tenovo 近

ces Suppose your firm is considering investing in a project with the cash flows shown below, that the required rate of return on projects this risk class is 13 percent, and that the maximum allowable payback and discounted payback statistics for your company are 3 and 3.5 years, respectively. Time: 1 2 3 5 Cash flow: -$290,000 $46,800 $65,000 $103,000 $103,000 $62,200 Use the MIRR decision rule to evaluate this project. (Do not round intermediate calculations and round your final answer to 2 decimal places.) MIRR % Should it be accepted or rejected? O rejected O accepted
A firm evaluates all of its projects by applying the IRR rule. Year Cash Flow 164,000 52,000 1 2 87,000 71,000 3 What is the project's IRR? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Internal rate of return % the required return is 12 percent, should the firm accept the project?
ch A project with an initial investment of $88000 and a profitability index of 1.239 also has an internal rate of return of 12%. The present value of net cash flows is O $71025. O $98560. O $88000. O $109032. Save for Later O Et V B 21 E 7 Attempts: 0 of 1 used Submit Answer F12
20 Suppose your firm is considering two mutually exclusive, required projects with the cash flows shown below. The required rate of return on projects of both of their risk class is 11 percent, and that the maximum allowable payback and discounted payback statistic for the projects are 2 and 3 years, respectively. 0 2 1 -38,000 28,000 48,000 -48,000 28,000 38,000 Time Project A Cash Flow Project B Cash Flow Use the NPV decision rule to evaluate these projects; which one(s) should be accepted or rejected? 19,000 68,000

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