Answered: Juhayna Food Industries is attempting…

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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Juhayna Food Industries is attempting to select the best of three mutually exclusive projects.

The initial investment and after-tax cash inflows associated with these projects are shown in the following table.

Cash flow	Project A	Project B	Project C
Initial Investment	100000	120,000	130,000
Year 1 Cash Inflows	30000	36,500	38000
Year 2 cash inflows	35000	45000	20000
Year 3 cash inflows	40000	40000	42000
Year 4 cash inflows	38000	35000	45000
Year 5 cash inflows	20000	30000	50000

Taking into consideration that the cost of debt 7% , cost of preferred stock 12% and cost of new common stock 15%. The weight of each source of capital are long term debt 30% , preferred stock 20% and common stock equity 50%.

TO dO

Create a spreadsheet to answer the following questions:

Calculate the firm‘s cost of capital ( WACC)
Calculate the payback period for each project.
Calculate the net present value (NPV) of each project,
Calculate the internal rate of return (IRR) for each project.
Discuss any conflict in ranking that may exist between NPV and IRR.
Summarize the preferences dictated by each measure, and indicate which project you would recommend. Explain why

I WANT THE ANSWER OF 4 AND 5 AND 6

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