The construction market is suffering from a short-term economic recession, and one of theinvestors has found investment opportunities for two projects whose initial indicators areexplained as follows:project A:r=6%project B: r-6%Yearcash flow (CF)Yearcash flow (CF)0-21000-39001810198028702198031205319854131441990A) Find values of NPV for the both project under value of r-6% during this 1* round?B) The construction market supports assumption which leads to an increase constantly in thevalues of r by 6% from 1st round to be the 2nd & 3rd rounds within a new r values so findagain NPVs for both mentioned projects.C) Give simple economic assessment for both above project.

NPV is the one of the method in Capital budgeting for help in taking the decision on the basis of…

The construction market is suffering from a short-term economic recession, and one of the investors has found investment opportunities for two projects whose initial indicators are explained as follows: project A:r-6% project B: r-6% cash flow (CF) Year cash flow (CF) Year 0 -2100 0 -3900 1 810 1 980 2 870 2 1980 3 1205 3 1985 1314 1990 A) Find values of NPV for the both project under value of r-6% during this 1" round? B) The construction market supports assumption which leads to an increase constantly in the values of r by 6% from 1st round to be the 2nd & 3rd rounds within a new r values so find again NPVs for both mentioned projects. C) Give simple economic assessment for both above project.

The construction market is suffering from a short-term economic recession, and one of the investors has found investment opportunities for two projects whose initial indicators are explained as follows: project A:r-6% project B: r-6% cash flow (CF) Year cash flow (CF) Year 0 -2100 0 -3900 1 810 1 980 2 870 2 1980 3 1205 3 1985 1314 1990 A) Find values of NPV for the both project under value of r-6% during this 1" round? B) The construction market supports assumption which leads to an increase constantly in the values of r by 6% from 1st round to be the 2nd & 3rd rounds within a new r values so find again NPVs for both mentioned projects. C) Give simple economic assessment for both above project.

Essentials of Business Analytics (MindTap Course List)

2nd Edition

ISBN:9781305627734

Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson

Publisher:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson

Chapter5: Probability: An Introduction To Modeling Uncertainty

Section: Chapter Questions

Problem 29P: The Siler Construction Company is about to bid on a new industrial construction project. To...

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The J.R. Ryland Computer Company is considering a plant expansion to enable the company to begin production of a new computer product. The companys president must determine whether to make the expansion a medium- or large-scale project. Demand for the new product is uncertain, which for planning purposes may be low demand, medium demand, or high demand. The probability estimates for demand are 0.20, 0.50, and 0.30, respectively. Letting x and y indicate the annual profit in thousands of dollars, the firms planners developed the following profit forecasts for the medium-and large-scale expansion projects. a. Compute the expected value for the profit associated with the two expansion alternatives. Which decision is preferred for the objective of maximizing the expected profit? b. Compute the variance for the profit associated with the two expansion alternatives. Which decision is preferred for the objective of minimizing the risk or uncertainty?
Roberts Company is considering an investment in equipment that is capable of producing more efficiently than the current technology. The outlay required is 2,293,200. The equipment is expected to last five years and will have no salvage value. The expected cash flows associated with the project are as follows: Required: 1. Compute the projects payback period. 2. Compute the projects accounting rate of return. 3. Compute the projects net present value, assuming a required rate of return of 10 percent. 4. Compute the projects internal rate of return.
The Siler Construction Company is about to bid on a new industrial construction project. To formulate their bid, the company needs to estimate the time required for the project. Based on past experience, management expects that the project will require at least 24 months, and could take as long as 48 months if there are complications. The most likely scenario is that the project will require 30 months. a. Assume that the actual time for the project can be approximated using a triangular probability distribution. What is the probability that the project will take less than 30 months? b. What is the probability that the project will take between 28 and 32 months? c. To submit a competitive bid, the company believes that if the project takes more than 36 months, then the company will lose money on the project. Management does not want to bid on the project if there is greater than a 25% chance that they will lose money on this project. Should the company bid on this project?
Huang Industries is considering a proposed project whose estimated NPV is $12 million. This estimate assumes that economic conditions will be "average." However, the CFO realizes that conditions could be better or worse, so she performed a scenario analysis and obtained these results: Economic Scenario Probability of Outcome NPV Recession 0.05 ($64 million) Below average 0.20 (10 million) Average 0.50 12 million Above average 0.20 16 million Boom 0.05 30 million Calculate the project's expected NPV, standa
Huang Industries is considering a proposed project whose estimated NPV is $12 million. This estimate assumes that economic conditions will be "average." However, the CFO realizes that conditions could be better or worse, so she performed a scenario analysis and obtained these results: Economic Scenario Probability of Outcome NPV Recession 0.05 ($72 million) Below average 0.20 (12 million) Average 0.50 12 million Above average 0.20 18 million Boom 0.05 38 million Calculate the project's expected NPV, standard deviation, and coefficient of variation. Enter your answers for the project's expected NPV and standard deviation in millions. For example, an answer of $13,000,000 should be entered as 13. Do not round intermediate calculations. Round your answers to two decimal places. is there a way to do the standard deviation in excel? i am having trouble with the formula
Huang Industries is considering a proposed project whose estimated NPV is $12 million. This estimate assumes that economic conditions will be "average." However, the CFO realizes that conditions could be better or worse, so she performed a scenario analysis and obtained these results: Economic Scenario Probability of Outcome NPV Recession 0.05 ($34 million) Below average 0.20 (16 million) Average 0.50 12 million Above average 0.20 16 million Boom 0.05 28 million Calculate the project's expected NPV, standard deviation, and coefficient of variation. Enter your answers for the project's expected NPV and standard deviation in millions. For example, an answer of $13,000,000 should be entered as 13. Do not round intermediate calculations. Round your answers to two decimal places. E(NPV): million σNPV: million CV:
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Suppose a firm is considering two mutually exclusive projects. One has alife of 6 years and the other a life of 10 years. Would the failure to employsome type of replacement chain analysis bias an NPV analysis against oneof the projects? Explain.
Waste Management Inc. is analyzing an average-risk project, and the following data have been developed. Unit sales will be constant, but the sales price will increase with inflation. Fixed costs will also be constant, but variable costs will rise with inflation. The project should last for 3 years, and there will be no salvage value. This is just one project for the firm, so any losses can be used to offset gains on other firm projects. What is the project's expected NPV? IRR? Would you accept this project? WACC 9.50% Net investment cost (depreciable basis) $100,000 Units sold 40,000 Average price per unit, Year 1 $25.00 Fixed op. cost excl. depr'n (constant) $150,000 Variable op. cost/unit, Year 1 $20.20 Annual depreciation rate 33.33% Expected inflation 5.00% Tax rate 40.0% Please show work.
We are evaluating a project that costs $845,000, has an eight-year life, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 51,000 units per year. Price per unit is $53, variable cost per unit is $27, and fixed costs are $950,000 per year. The tax rate is 22%, and we require a return of 12% on this project. a. Calculate the accounting break-even point. b. Calculate the base-case operating cash flow and NPV. c. Suppose the projections given for price per unit, quantity, variable costs per unit, and fixed costs are all accurate to within ±10%. Calculate the best-case and worst-case NPV figures.
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To illustrate how a sensitivity analysis might be performed, we consider once more the SMP investment: a $500,000 initial investment, annual savings of $92,500 for a 10-year period, and a salvage value of $50,000. As before, a 10% MARR applies. Let’s consider how sensitive the annual worth for the investment is to errors in estimating the initial investment, the annual savings, the salvage value, the investment’s duration, and the MARR. Specifically, for an error range of ±50% for each parameter, what is the impact on AW?