Fin 571 Final Exam 3 Essay examples

ii-We would like to know how changing the discount rate would affect the NPV of each project. For both projects we have that as the discount rate decreases each project increases in value, and when the discount rate increases both

9. You are analyzing the value of a potential investment by calculating the sum of the present values of its expected cash flows. Which of the following would lower the calculated value of the investment?

Calculate the after tax cash flows for the project for each year. Explain the methods used in your calculations.

25. Which of the following journal entries would be recorded if a business purchased equipment for $3,000

d. The expected return and standard deviation will change as the portfolio mix changes.( see the assumption portfolio on the attachment).

1) Which of the following financial statements is divided into major categories of operation, investing, and financial activities?

The payback period allows an analyst to evaluate the duration it takes for the company to generate dollar returns that pay back the initial cost of the investment. The positives of this approach are that it is fairly easy to understand by both management and

-This project’s payback is 4.1 years. Decision makers use this information to determine and measure how long the project will take before it pays for itself. This could be seen to similar as a breakeven analysis.

e. A decrease in the projects initial cost will cause the project to have a negative NPV

3- Calculate the depreciation for old and new machine and subtract the old from the new.

2. Which one of the following principles refers to the assumption that a project will be evaluated based on its incremental cash flows?

There are two methods which is applied to this project. First is by calculating net present value and second is by using Internal rate of return (IRR). Also, it determines how many years that Riverlea earns back from its investment if they take this project. This is called payback period.

5/ the net income reported on the income statements for the year was 55000 and depreciation of fixed assets for the year was 22000 . The balances of the current assets and current liability accounts at the beginning and end of the year are shown at the top of the following page? / 740

5. The project’s net present value is: NVP = - (8,000,000) + 3,956,000/1.15 + 8,416,000/1.32 + 10,900,000/1.52 + 8,548,000/1.75 + 5,980,000/2.01 = $16,831,095.66 6: What is its internal rate of return? Life of Asset Cost of Asset 5 years (8,000,000)

The payback period is the most widely used technique and is literally the amount of time required for the cash inflows from a capital investment project to equal the cash outflows. The usual way that firms deal with deciding between two or more competing projects is to accept the project that has the shortest payback period. Payback is often used as an initial screening method.