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- Question 5: Find the net present value, interpret whether the NPV suggests you should accept or reject the project, find the payback period, find the discounted payback period, find the profitability index, interpret whether the profitability index suggests you should accept or reject the project, find the internal rate of return, explain whether the internal rate of return can repay the cost of borrowing money to conduct the project, find the modified internal rate of return, and explain with the modified internal rate of return can repay the cost of borrowing money to conduct the project. All for the following situation: The initial capital outlay is $175,000, the first-year annual operating cash flow is projected to be 20,000 but should grow by 5% per year during each of the project's 30 years, the after-tax-salvage cash flow is guessed to be $500,000, the required rate of return on this project is 15.50% and the company weighted average cost of capital is 12.50%.Mf4. 1. Calculate the Payback period 2. Calculate the Net Present Value (NPV) of both projects 3. Calculate the Internal Rate of Return (IRR) of both projects 4. Critically discuss the merits of each investment appraisal method, then discuss the result of the evaluations you have made of the two projects and advise the company which project should be undertakentrue or false 14. Marginal analysis means that projects must be implemented if their revenues are higher than their expenses.
- QUESTION 4 What does IRR stand for? Explain what this means in practical terms and why it is useful to any firm. How might the firm use IRR to make a decision about the possible investment?4. Slide 1 The significance difference between U.S. GAAP and IFRS in regard of development cost that IFRS expensed it. Select one:TrueFalse(question3 c,d) c) Calculate the profitability index (PI) for each project d) Calculate the internal rate of return (IRR) for each project.
- 18. how much is the capitalized cost of investment?Question 3 A firm is looking to evaluate the income coming from a project. The project has alowest possible income of $1,036.31, a likely income of $2,113.29 and a maximum income of $2,904.68. What is a the risk mitigated income that a firm should use their analysis? Enter your answer below (no $ sign), and show your work in your drobox submission. Your Answer:Chapter 11 Homework Questions 1. Why are capital projects critical? 2. What are the critical steps involved in the capital budgeting process? 3. Why is capital cost allowance used instead of depreciation expense in capital budgeting? 4. What do we mean by the economic life of a project? 5. Differentiate between a capital investment and an expense investment. 6. Why is working capital part of cash payouts in a capital investment, and what is its makeup?
- Problem 4. Which project would you select on the basis of rate of return, assuming MARR =15%. Please use excel spreadsheet to answer.QUESTION FOUR Discuss how the following factors could impact an Investment Decision: Risk and Uncertainty Length of Project Size of investment project Economic and Market environment Experience and technical knowledge of ManagementUse attachment to answer question q2- This question relates to the diagram, which shows the NPV profile for Projects X and Y. At what cost of capital are we indifferent between Projects X and Y? Select one: a. 13% b. 4% c. 10% d. 9%