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part 67 8
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- Suppose that National Waferonics has before it a proposal for a four-year financial lease. Year 0 Year 1 Year 2 Year 3 Lease cash flow +59,200 −27,900 −23,300 −18,700 These flows reflect the cost of the machine, depreciation tax shields, and the after-tax lease payments. Ignore salvage value. Assume the firm could borrow at 14% and faces a 21% marginal tax rate. a. What is the value of the equivalent loan? b. What is the value of the lease?5). The HC Corporation is trying to choose between the following two mutually exclusive design projects: Year Cash Flow I (in dollars) Cash Flow II (in dollars) 0 -64, 000 -18,000 1 31, 000 9,700 2 31, 000 9,700 3 31, 000 9,700 a). If the required return is 10%, and the company applies the profitability index decision rule, which project should the firm accept? Why? b). If the company applies the NPV decision rule, which project should it take? Why? c). Explain why your answers in (a) and (b) are different.Salalah company management is considering two competing investment Projects A and B.YearInitial Investment 12345Project A 8000 2750 2750 2750 2750 2750Project B 8000 3000 3000 3000 3000 3000DISCOUNT RATE 5.05%Q1) Use the information below and help the management in choosing the most desirable Project using all the following techniques:1) Payback Period Technique.2) Discounted Payback Period Technique.3) Net Present Value Technique4) Profitability Index Technique.Q2) Based on your solution or answer to question 1, comment as to which proposal is better and why?
- Salalah company management is considering two competing investment Projects A and B.YearInitial Investment 12345Project A 8000 2750 2750 2750 2750 2750Project B 8000 3000 3000 3000 3000 3000DISCOUNT RATE 5.05%Q1) Use the information below and help the management in choosing the most desirable Project using all the following techniques:1) Payback Period Technique.2) Discounted Payback Period Technique.3) Net Present Value Technique4) Profitability Index Technique. Q2) Based on your solution or answer to question 1, comment as to which proposal is better and why?3. A proposal to reduce oil spill on MX5 has a B-C ratio of 1.4. The conventional annual worth of benefits minus disbenefits is P560,000. What is the first cost of the project if the interest rate is 6% per year and the project is expected to have a 20-year life?Project 1 requires an initial investment on $50,000 and has an internal rate of return (IRR) of 18%. A mutually exclusive alternative, Project 2, requires an investment of $70,000 and has an IRR of 23%. Which of the following statements is true concerning the rate of return on the incremental $20,000 investment? (a) It is less than 18%. (b) It is between 18 and 23%. (c) It is greater than 23%. (d) It cannot be determined from the data given.
- The Weiland Computer Corporation is trying to choose between the following mutually exclusive design projects, P1 and P2: Year 0 1 2 3 Cash flows (P1) -$53,000 27,000 27,000 27,000 Cash flow (P2) -$16,000 9,100 9,100 9,100 If the discount rate is 10 percent and the company applies the profitability index (PI) decision rule, which project should the firm accept? If the firm applies the Net Present Value (NPV) decision rule, which project should it take? Are your answers in (a) and (b) different? Explain why?• Sienna plc has deduced the net present value of a potential investment project at two discount rates. The relevant data are as follows: Discount rate 20% 30% NPV (£000) 60 (120) What is the approximate internal rate of return of the project? A 16.7% B 23.3% C 26.6% D 33.3%Comparing Investment Criteria [L01,2,3,5,7] Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 -$300,000 -$40,000 1 20,000 19,000 2 50,000 12,000 3 50,000 18,000 4 390,000 10,500 Whichever project you choose, if any, you require a 15 per cent return on your investment. a. If you apply the payback criterion, which will you choose? Why? b. If you apply the discounted payback criterion, which investment will you choose? Why? c. If you apply the NPV criterion, which investment will you choose? Why? d. If you apply the IRR criterion, which investment will you choose? Why? e. If you apply the profitability index criterion, which investment will you choose? Why? f. Based on your answers in (a) through (e), which project will you finally choose? Why? Please explain your calculations and conclusions
- 19. Central Energy is considering two mutually exclusive projects, Project Red and Project The projects have the following cash flows: Year Project Red Cash Flows Project White Cash Flows 0 -$1,000 -$1,000 1 100 700 2 200 400 3 600 200 4 800 100 Assume that both projects have a 10 percent WACC. What is the internal rate of return (IRR) of the project that has the highest NPV? Group of answer choices 10.00% 21.96% 21.83% 18.24% 14.30%Better plc is comparing two mutually exclusive projects, whose details are given below.The company’s cost of capital is 12 per cent.Project A Project B£m £mYear 0 (150) (152)Year 1 40 80Year 2 50 80Year 3 60 50Year 4 60 40Year 5 80 30(a). Using the net present value method, which project should be accepted?(b). Using the internal rate of return method, which project should be accepted?(c). If the cost of capital increases to 20 per cent in year 5, would your advice change?Better plc is comparing two mutually exclusive projects, whose details are given below.The company’s cost of capital is 12 per cent.Project A Project B£m £mYear 0 (150) (152)Year 1 40 80Year 2 50 80Year 3 60 50Year 4 60 40Year 5 80 30(a). Using the net present value method, which project should be accepted?(b). Using the internal rate of return method, which project should be accepted?(c). If the cost of capital increases to 20 per cent in year 5, would your advice change? Hello.i have the solution you send me but i am trying to understand where did you get the calculations for in the worknotes tabel. I still cant calculate the IRR.i really dont understand how to do it. Can you help me please by using the numbers in the tabel so i can understand what is that you are adding or taking away please? I know how to calculate the NPV but not the IRR