Net Cash Flows and NPVs for different discount rate for projects S and L are given below Net Cash Flows ($) Discount Rate (%) NPVS NPVL Year (t) Project S Project L 0% $800 $1100 0 $(3000) $(3000) 5 554.32 1 1500 400 10 161.33 2 1200 900 15 (90.74) (259.24) 3 800 1300 20 (309.03) (565.97) 4 300 1500 a) Calculate the payback period in years for the Project S and Project L i) Payback for Project S: ii) Payback for Project L: c) Calculate NPVS for 5% and NPVL for 10%. Fill the table i) NPVS at 5%: ii) NPVS at 10%: d) What is the IRR for S? (Write down the equation for IRR and then Use an excel worksheet to calculate IRR Equation: Answer: e) What is the IRR for S? (Write down the equation for IRR and then Use an excel worksheet to calculate IRR Equation: Answer: f) What is the cross-over rate? (Write down the equation for IRR and then Use an excel worksheet to calculate IRR Equation: Answer: g) If projects are mutually exclusive, which project would you accept? i) at 5% ii) at 15% h) If projects are independent (not mutually exclusive), which project(s) would you accept? i) at 5% ii) at 15%
- Net Cash Flows and NPVs for different discount rate for projects S and L are given below
|
|
Net Cash Flows ($) |
|
Discount Rate (%) |
NPVS |
NPVL |
|
|
Year (t) |
Project S |
Project L |
|
0% |
$800 |
$1100 |
|
0 |
$(3000) |
$(3000) |
|
5 |
|
554.32 |
|
1 |
1500 |
400 |
|
10 |
161.33 |
|
|
2 |
1200 |
900 |
|
15 |
(90.74) |
(259.24) |
|
3 |
800 |
1300 |
|
20 |
(309.03) |
(565.97) |
|
4 |
300 |
1500 |
|
|
|
|
a) Calculate the payback period in years for the Project S and Project L
i) Payback for Project S:
ii) Payback for Project L:
c) Calculate NPVS for 5% and NPVL for 10%. Fill the table
i) NPVS at 5%:
ii) NPVS at 10%:
d) What is the
Equation:
Answer:
e) What is the IRR for S? (Write down the equation for IRR and then Use an excel worksheet to calculate IRR
Equation:
Answer:
f) What is the cross-over rate? (Write down the equation for IRR and then Use an excel worksheet to calculate IRR
Equation:
Answer:
g) If projects are mutually exclusive, which project would you accept?
i) at 5%
ii) at 15%
h) If projects are independent (not mutually exclusive), which project(s) would you accept?
i) at 5%
ii) at 15%
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