Insteadof solving for a zero NPV as is usual in setting a bid price, the company president requires arnNPV of $100,000, so we will solve for a NPV of that amount. The NPV equation for this project rs(remember to include the NWC cash flow at the beginning of the project, and the NWC recovery atthe end)NPV$100,000--$4,100,000-445,000 + 3,699,512.67-OCF(PVIFA10%,4)+[(S303750+ 445,000)/1014Solving for the OCF, we get:

Answered: Image /qna-images/answer/9055a372-4cfb-4a1d-8e45-4088dd3eaa2a.jpg

Answered: Instead of solving for a zero NPV as is…

Financial And Managerial Accounting

15th Edition

ISBN:9781337902663

Author:WARREN, Carl S.

Publisher:WARREN, Carl S.

Chapter26: Capital Investment Analysis

Section: Chapter Questions

Problem 2CMA: Staten Corporation is considering two mutually exclusive projects. Both require an initial outlay of...

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Staten Corporation is considering two mutually exclusive projects. Both require an initial outlay of 150,000 and will operate for five years. The cash flows associated with these projects are as follows: Statens required rate of return is 10%. Using the net present value method and the present value table provided in Appendix A, which of the following actions would you recommend to Staten? a. Accept Project X and reject Project Y. b. Accept Project Y and reject Project X. c. Accept Projects X and Y. d. Reject Projects X and Y.
Redbird Company is considering a project with an initial investment of $265,000 in new equipment that will yield annual net cash flows of $45,800 each year over its seven-year life. The companys minimum required rate of return is 8%. What is the internal rate of return? Should Redbird accept the project based on IRR?
The Webex Corporation is trying to choose between the following two mutually exclusive designprojects: Year Net Cash Flow Project - I($) Net Cash Flow Project - II($) 0 (53,000) (16,000) 1 27000 9100 2 27000 9100 3 27000 9100 (a) If the required return is 10% and the company applies the Profitability Index decision rule,which project should the firm accept?(b) If the company applies the Net Present Value decision rule, which project should it take?(c) Explain why your answers in (a) and (b) are different(d) Calculate the Internal Rate of Return of both projects.
A firm evaluates all its projects by applying the IRR rule. the current proposed project has a cash flow of negative 37,048 dollars, 16,850 15,700 and 19,300 for years zero to three, respectfully. The required return is 18%. what is the project IRR? should the products be accepted or rejected?
The Michner corporation is trying is trying to choose between the following 2 mutually exclusive design project: Cash Flow 1 Cash Flow 2 Year 0: -82000 -21700 Year 1: 37600 11200 Year 2: 37600 11200 Year 3: 37600 11200 If the required return is 10% and the company applies the profitability index decision rule, which project should the firm accept? If the company applies the NPV decision rule, which project should it take? why are a & b are different
Consider the following projects, X and Y where the firm can only choose one. Project X costs $1500 and has cash flows of $678, $652, $347, $111, $54, $16 in each of the next 6 years. Project Y also costs $1500, and generates cash flows of $738, $693, $405 for the next 3 years, respectively. WACC=11%.If it possible for conflicts to exist between the NPV and the IRR when independent projects are being evaluated? Explain your answer.
Project X has the following cash flows: C0 = -1,250, C1 = 750, and C2 = 900. If the IRR of the project is 20 percent and if the cost of capital is 25 percent, you would need more information accept the project reject the project be indifferent
Malholtra Inc. 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. WACC: 10.00% Year 0 1 2 3 4 Cash flows -$975 $300 $320 $340 $360 Please explain the process to find MIRR and show calculations.
XYZ Corp. is considering a project that has the following cash flow data. What is the project's IRR? Note that a project's IRR can be less than the WACC or negative, in both cases it will be rejected. Year 0 1 2 3 Cash flows -$1,000 $325 $425 $525
Suppose Praxis Corporation’s CFO is evaluating a project with the following cash inflows. She does not know the project’s initial cost; however, she does know that the project’s regular payback period is 2.5 years. Year Cash Flow Year 1 $375,000 Year 2 500,000 Year 3 425,000 Year 4 475,000 If the project’s weighted average cost of capital (WACC) is 8%, what is its NPV? $374,910 $412,401 $431,146 $299,928
Bloombish Corp. Inc. is considering a project that has cash flows of -$152,000, $60,800, $61,300, and $75,000 for Years 0 to 3 respectively. The required rate of return is 14 percent. Based on the internal rate of return ________ percent, you should ___________ the project. Select one: A. 12.95 percent; accept B. 14.67 percent; accept C. 13.67 percent; reject D. 14.67 percent; reject
Suppose Acme Manufacturing Corporation’s CFO is evaluating a project with the following cash inflows. She does not know the project’s initial cost; however, she does know that the project’s regular payback period is 2.5 years. Year Cash Flow Year 1 $350,000 Year 2 450,000 Year 3 400,000 Year 4 450,000 If the project’s weighted average cost of capital (WACC) is 8%, what is its NPV? $304,447 $358,173 $322,356 $340,264

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