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linda_us
linda_us, Master's Degree
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Problem 1Suppose a company is considering two independent

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Problem 1


Suppose a company is considering two independent projects, Project A and Project B.  The cash outlay for Project A is $14,000. The cash outlay for Project B is $20,000. The company’s cost of capital is 12%. The following table shows the after-tax cash flows.  For each project, compute the NPV, the IRR, the MIRR, and indicate the accept/reject decision.































Year



Project A



Project B



1



$4800



$6700



2



$4800



$6700



3



$4800



$6700



4



$4800



$6700



 


 


 


Problem 2


What is the internal rate of return for a project that has a net investment of $60,000 and the following net cash flows: Year 1 = $15,000; Year 2 = $20,000; Year 3 = $25,000; Year 4 = $30,000?


 


Problem 3


A CFO is considering a project that has the following cash flow and WACC data.  What is the project's MIRR?  Note that a project's projected MIRR can be less than the WACC (and even negative), in which case it will be rejected.  The firm’s WACC is 10%.  


Project A                   


Year                 Cash Flow                 


  0                    -$800                       


  1                        350                       


  2                         350                       


  3                         350


 


 


 


Problem 4


A company is faced with two independent investment opportunities.  The corporation has an investment policy which requires acceptable projects to recover all costs within 3 years. The corporation uses the discounted payback method to assess potential projects and utilizes a discount rate of 10 percent.  The cash flows for the two projects are:


 


                             Project A                 Project B


 Year                    Cash Flow               Cash Flow  


  0                         -$100,000                     -$80,000


  1                            40,000                          50,000


  2                            40,000                          20,000


  3                            40,000                          30,000


  4                            30,000                               0


 


Which is the discounted payback for each project?


 


Problem 5


What is the internal rate of return for a project that has a net investment of $75,000 and the following net cash flows: Year 1 = $15,000; Year 2 = $20,000; Year 3 = $25,000; Year 4 = $30,000?

Thanks for requesting me. Please let me know your deadline.
Customer: replied 3 years ago.

today

I will post the solution in few hours.
Customer: replied 3 years ago.

do you have an update?

Sorry I had issue with my system. I am in the middle for arranging another system.

Will update you in 30 minutes.
I got another system will post the solution by 10 :-)

Really sorry for the delay.


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