For the three mutually exclusive alternatives below, use a MARR of 15% per year to select the best alternative using (a.) rate of return analysis and (b.) Aw analysis on the actual cash flow estimates with MARR=15%
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For the three mutually exclusive alternatives below, use a MARR of 15% per year to select the best alternative using (a.)
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- 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. 0.3491The following information is available for a potential investment for Panda Company: Initial investment $105000 Net annual cash inflow 20000 Net present value 42150 Salvage value 10000 Useful life 10 yrs. The potential investment’s profitability index is A. 2.49. B. 3.44. C. 5.25. D. 1.40.Assuming today is 1st January 2021. Date Cash flows (Rs.) 01-Jan-21 (900,000 ) 31-Dec-21 0 31-Dec-22 240,000 31-Dec-23 320,000 31-Dec-24 490,000 31-Dec-25 250,000 31-Dec-26 345,000 Cost of Capital = 8% Required: Net Present Value (NPV) Payback period (Simple and discounted) Internal Rate of Return (IRR) Solve At Excel.
- Vista Limited intends purchasing a new machine and has a choice between the following two machines:Equipment AEquipment BInitial costR220 000R240 000Expected useful life5 years5 yearsScrap valueNilNilExpected net cash inflows:RREnd of:Year 155 00070 000Year 260 00070 000Year 362 00070 000Year 460 00070 000Year 570 00070 000The company estimates that its cost of capital is 12%. Required:2.1 Calculate the Payback Period of both equipment. (Answers must be expressed in years, months and days). 2.2 Calculate the Accounting Rate of Return (on initial investment) for both equipment A and B. (Answers must be expressed to 2 decimal places). 2.3 Calculate the Net Present Value of each equipment. (Round off amounts to the nearest Rand.) 2.4 Calculate the Internal Rate of Return of Equipment B.ind the IRR 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 2,000The project's NPV? WACC: 10.00% Year 0 1 2 3 Cash flows -$1,000 $450 $460 $470
- Payback Machine X Cumulative cash flow Machine Y Cumulative cash flow Investment 1,000,000 1,000,000 (1,000,000) (1,000,000) Year 1 $500,000 (500,000) $200,000 (800,000) Year 2 $500,000 0 $300,000 (500,000) Year 3 $300,000 $500,000 0 Year 4 $100,000 $500,000 Payback 2 years 3 years ARR Machine X ARR = Average Profit Average investment Therefore: Depreciation (1000, 000-200,000) /4 = 200000 = 200,000X 4 = 800,000 Profits before depreciation 1400,000 Less depreciation (800,000) Accounting Profit 600,000 Average profits 600,000/4yrs =150,000 Average investment = (initial investment + residual value)/2 = (1,000,000 + 200,000)/2 = 600,000 (Average profit/ average investment) X 100 = (150,000/600,000) X 100 = 25% Machine Y…How do you calculate the NPV and IRR Project 1 Year Cashflows Discount Rate 10% 0 $ (750,000.00) 1 $ 250,000.00 2 $ 300,000.00 3 $ 350,000.00 4 $ 200,000.00 5 $ 100,000.00 Project 2 Year Cashflows Discount Rate 10% 0 $ (1,000,000.00) 1 $ 200,000.00 2 $ 300,000.00 3 $ 400,000.00 4 $ 500,000.00 5 $ 700,000.00The project's IRR? Year 0 1 2 3 4 5 Cash flows -$8,750 $2,000 $2,025 $2,050 $2,075 $2,100
- Vista Limited intends purchasing a new machine and has a choice between the following two machines:Equipment AEquipment BInitial costR220 000R240 000Expected useful life5 years5 yearsScrap valueNilNilExpected net cash inflows:RREnd of:Year 155 00070 000Year 260 00070 000Year 362 00070 000Year 460 00070 000Year 570 00070 000The company estimates that its cost of capital is 12%. Calculate the Internal Rate of Return of Equipment B.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?For the cash flows shown, the correct equation for FW2 using the ROIC method at the reinvestment rate of 20% per year is:a. [10,000(1+ i'' ) + 6000](1.20) - 8000b. [10,000(1.20) + 6000(1+i'' )](1.20) - 8000c. [10,000(1.20) + 6000](1.20) - 8000d. [10,000(1.20) + 6000](1+ i'' ) - 8000