(a) Determine the values of X and Y.
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- Assume San Lucas Corporation in MAD 26-1 assigns the following probabilities to the estimated annual net cash flows: a. Compute the expected value of the annual net cash flows. b. Determine the expected net present value of the equipment, assuming a desired rate of return of 10% and the expected annual net cash flows computed in part (a). Use the present value tables (Exhibits 2 and 5) provided in the chapter in determining your answer. c. Based on your results in parts (a) and (b), should San Lucas Corporation invest in the equipment?The following project has cash flows as follows: Year Project A 0 -$705,000 1 $225,000 2 $421,500 3 $275,000 What is the IRR?Calculating IRR Compute the internal rate of return for the cash flows of the following two projects: Year Project A Project B 0 -$7,300 -$4,390 1 3, 940 2,170 2 3,450 2,210 3 2,480 1,730
- What is the NPV of the estimated cash flows for the following project using a Weighted Average Cost of Capital of 7.0%? Year 0 1 2 3 Cash Flow -140 50 70 90 Group of answer choices 47.54 38.63 59.94 70.00 41.34) For each of the following, determine the expected cash flows. Cash FlowEstimate ProbabilityAssessment a. $ 4,800 20% 6,300 50% 7,500 30% b. $ 5,400 30% 7,200 50% 8,400 20% c. $(1,000) 10% 3,000 80% 5,000 10%Determine the ERR (External rate of return) of the cash flows if external rate (e) is given as %19. Year Cash Flow 0 -3000 1 2000 2 4000 3 -1000 4 3000 5 4000 6 -5000 7 9000 Select one: a. 0.2988 b. 0.2638 c. 0.2565 d. 0.3073 e. 0.2783 f. 0.3491
- Find the NPV for the following cash flows assuming a WACC of 10%. YR CF 0 -15,000 1 6,000 2 4,000 3 2,000 4 3,000 5 2,000Here are cash flows for a project under consideration. C(0)= -$8160, C(1)=6180, and C(2)=20280. What is the IRR of the project?Assume you are evaluating two mutually exclusive projects, the cash flows of which appear below and that your company uses a cost of capital of 13% to evaluate projects such as these. Time Project A Cash Flows Project B Cash Flows 0 -$46,800 -$63,600 1 -21,600 20,400 2 43,200 20,400 3 43,200 20,400 4 43,200 20,400 5 -28,800 20,400 Sketch the NPV profile for projects A & B. Determine the crossover point for these projects’ NPV profiles.
- For the cash flows shown, determine: (a) the number of possible i* values (b) the i* value displayed by the IRR function (c) the external rate of return using the MIRR method if ii = 18% per year and ib = 10% per year. Year 0 1 2 3 4 Revenues, $ 0 25,000 19,000 4000 18,000 Costs, $ −6000 −30,000 −7000 −6000 −12,000Look at the cash flows for projects F and G given below. Cash Flows($) Project C0 C1 C2 C3 C4 C5 C6 C7 C8 IRR (%) NPV at 10% F (8,000 ) 5,200 5,200 5,200 0 0 0 0 0 42.6 4,932 G (8,000 ) 2,600 2,600 2,600 2,600 2,600 2,600 2,600 2,600 28.0 5,871 The cost of capital was assumed to be 10%. Assume that the forecasted cash flows for projects of this type are overstated by 8% on average. That is, the forecast for each cash flow from each project should be reduced by 8%. But a lazy financial manager, unwilling to take the time to argue with the projects’ sponsors, instructs them to use a discount rate of 18%.Projects A and B have the following cash flows: End-of-Year Cash Flows 0 1 2Project A − $1,000 $1,150 $100Project B − $1,000 $100 $1,300Their cost of capital is 10%.Q UESTIO NS:a. What are the projects’ NPVs, IRRs, and MIRRs?b. Which project would each method select if the projects were mutually exclusive?
