Suppose the IRR of Machine X = 17%. The PW of Machine Y (using a MARR = 20%) is $3,679. We can conclude that Machine Y is more profitable than Machine X. Yes O No
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- Consider the investment project with the net cash flows as shown in the following table. What would be the value of X if the project's IRR is 23%? (a) $4,500(b)$4,750(c) $6,890(d)$6,500A supermarket chain buys loaves of bread from its supplier at $0.50 per loaf. The chain is considering two options to bake its own bread. Neither machine has a market value at the end of seven years, and MARR is 12% per year. Use this information to answer (Select the closest answer), What is the minimum number of loaves that must be sold per year to justify installingMachine A instead of buying the loaves from the supplier? (a) 7,506 (b) 22,076 (c) 37,529 (d) 75,059 (e) 15,637.A rural community/company is considering an investment in a cottage industry for which the net cash flows have been estimated as follows: i) What is the NPV if the discount rate is 10%? ii) Using discount rates of 10% and 14% calculate the IRR? iii) Is this project acceptable?
- Smith and Co. has to choose between two mutually exclusive projects. If it chooses project A, Smith and Co. will have the opportunity to make a similar investment in three years. However, if it chooses project B, it will not have the opportunity to make a second investment. The following table lists the cash flows for these projects. If the firm uses the replacement chain (common life) approach, what will be the difference between the net present value (NPV) of project A and project B, assuming that both projects have a weighted average cost of capital of 10%? Cash Flow Project A Project B Year 0: –$17,500 Year 0: –$40,000 Year 1: 10,000 Year 1: 8,000 Year 2: 16,000 Year 2: 16,000 Year 3: 15,000 Year 3: 15,000 Year 4: 12,000 Year 5: 11,000 Year 6: 10,000 $15,731 $11,012 $12,585 $9,439 $14,158 Smith and Co. is considering a three-year project that has a weighted average cost of capital…Sunshine Smoothies Company (SSC) manufactures and distributes smoothies. It is considering the "weight loss" smoothies project. The project would require a $4 million investment outlay today The after-tax cash flows would depend on consumers’ demand. There is a 30% chance that demand will be good, and the project will produce after-tax cash flows of $2 million at the end of each year for the next 3 years. There is a 70% chance that demand will be poor, and the project will produce after-tax cash flows of $1 million at the end of each year for the next 3 years. The project is riskier than the firm's other projects, so it has a WACC of 12%. - The firm will know whether the project is success or not after receiving first year's cash flows from normal operating.. - After receiving the first year's cash flows (no matter what receive $1M or $2M in the first year), the firm will have the option to abandon the project. - If the firm decides to abandon the project, the company will no longer…A hospital in The Upper Cumberland area bought a diagnostic machine at a cost of $40,000. Maintenance cost is expected to remain constant throughout the life of this machine at $2,000 per year. The salvage value is estimated to be “0” at the end of the useful life of 10 years. Determine the economic life of this machine. MARR = 10% A. 5 years B. 1 year C. 10 years D. 7 years
- Show that the same selection is made with: a. The PW Method b. The IRR method c. The ERR method d. Would leasing crane A for nine years, assuming the same costs per year as for three years, be preferred over your present selection? (ϵ = MARR = 15%)If the internal rate of return on a project exceeds its cost of obtaining the funds, it’s a good investment. Question 9 options: True FalseYou have a project with the net cash flow summarized below. The project is not suitable for direct reinvestment, so incoming revenue will be placed into an external account that yields 2.5%. (The "External Reinvestment Rate" is 2.5%). What is the ERR for this project? (Provide your answers in digits only with 2 decimal places. No comas or pesos or percent.)
- Payback Period and Net Present Value If a project with conventional cash flows has a payback period less than the project’s life, can you definitively state the algebraic sign of the NPV? Why or why not? If you know that the discounted payback period is less than the project’s life, what can you say about the NPV? Explain. QConsider the following cash flow diagram. The probability of the pessimistic value of N = 4 years is 0.30, the probability of the most likely value of N = 6 years is 0.50, and the probability of the optimistic value of N = 9 years is 0.2. What is the expected value of the present worth of this project when the interest rate is 8% per year?You are considering the following project: It pays you $2,500 at the end of the first year, costs $8,500 by the end of the second year and brings $6,800 a year after. What is the project's internal rate of return(s), exact external rate of return and the approximate external rate of return it current MARR is 14%?