Use Excel to solve the following problem. Assume that as a local government financial analyst you are asked to project the feasibility of a loan to a proposed public service venture for its start-up funding. The venture’s principals estimate that, at the end of 5 years, they will be able to pay back up to $800,000 from revenues accruing to the venture’s activities. Assuming that your organization’s current “average cost of capital” is 4.8% (the “discount rate”). Assuming monthly compounding, what is the maximum amount your government can commit to the venture for its start-up? (I have worked this problem out on my own, I just want to be sure I used the correct formulas.)

Gina Ripley, president of Dearing Company, is considering the purchase of a computer-aided manufacturing system. The annual net cash benefits and savings associated with the system are described as follows: The system will cost 9,000,000 and last 10 years. The companys cost of capital is 12 percent. Required: 1. Calculate the payback period for the system. Assume that the company has a policy of only accepting projects with a payback of five years or less. Would the system be acquired? 2. Calculate the NPV and IRR for the project. Should the system be purchasedeven if it does not meet the payback criterion? 3. The project manager reviewed the projected cash flows and pointed out that two items had been missed. First, the system would have a salvage value, net of any tax effects, of 1,000,000 at the end of 10 years. Second, the increased quality and delivery performance would allow the company to increase its market share by 20 percent. This would produce an additional annual net benefit of 300,000. Recalculate the payback period, NPV, and IRR given this new information. (For the IRR computation, initially ignore salvage value.) Does the decision change? Suppose that the salvage value is only half what is projected. Does this make a difference in the outcome? Does salvage value have any real bearing on the companys decision?

Assume that as a local government financial analyst you are asked to project the feasibility of a loan to a proposed public service venture for its start-up funding. The venture’s principals estimate that, at the end of 5 years, they will be able to pay back up to $800,000 from revenues accruing to the venture’s activities. Assuming that your organization’s current “average cost of capital” is 4.8% (the “discount rate”). Assuming monthly compounding, what is the maximum amount your government can commit to the venture for its start-up?

Dawn is preparing a home office to perform subcontract projects for midsized architect firms. She plans to use $13,000 of her own funds, which currently generate a return of 4% per year. The remainder of financing will be provided by a $9,000 bank loan carrying a 9% per year interest rate. She hopes to realize a return of 3% above the average cost of capital to establish her office, and she realizes that the factors of inflation and risk should also be considered. Her decision is to add another 1.5% per year to compensate for these elements. What is the MARR she should use when evaluating projects? the Marr she should use is __%

Supervenes is a freight delivery company, it uses the internal rate of return (IRR) to select projects. The treasurer was presented with an opportunity to invest in project Sigma which requires an initial investment of $20,000 and generates cash inflows of $8,000 per year for 5 years. The cost of capital is 10%. Required: Calculate the IRR for the Sigma project and advice if the project should be taken. The full calculation must be shown for marks.

Over the semester we have learned that one of the three pillars of our economy is capital expenditures (CAPEX) by private and public businesses. On an annual basis companies allocate a certain amount of their free cash to develop projects that will facilitate company growth and earnings, which will, in turn, improve stock prices and shareholder value. Inside this process is the selection of projects that will be selected among many different available projects. Those companies that make the best choices are the ones that will successfully grow. Those that do not will join the garbage heap of companies that fail. You have that choice as the CFO of Almost Done (AD) Enterprises. Below are the specifics about a project that has been presented. Questions concerning this project follow the specifics of the project.   AD, a pharmaceutical company, has developed a new drug that will supposedly cure COVID-19 and provide immunity to the general population. The results are so promising that the…

Over the semester we have learned that one of the three pillars of our economy is capital expenditures (CAPEX) by private and public businesses. On an annual basis companies allocate a certain amount of their free cash to develop projects that will facilitate company growth and earnings, which will, in turn, improve stock prices and shareholder value. Inside this process is the selection of projects that will be selected among many different available projects. Those companies that make the best choices are the ones that will successfully grow. Those that do not will join the garbage heap of companies that fail. You have that choice as the CFO of Almost Done (AD) Enterprises. Below are the specifics about a project that has been presented. Questions concerning this project follow the specifics of the project.   AD, a pharmaceutical company, has developed a new drug that will supposedly cure COVID-19 and provide immunity to the general population. The results are so promising that the…

The Yurdone Corporation wants to set up a private cemetery business. According to the CFO, Barry M. Deep, business is “looking up.” As a result, the cemetery project will provide a net cash inflow of $124,000 for the firm during the first year, and the cash flows are projected to grow at a rate of 5.7 percent per year forever. The project requires an initial investment of $1,470,000.     a. If the company requires a return of 13 percent on such undertakings, what is the NPV of the project? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. The company is somewhat unsure about the assumption of a growth rate of 5.7 percent in its cash flows. At what constant growth rate would the company just break even if it still required a return of 13 percent on its investment? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

The Yurdone Corporation wants to set up a private cemetery business. According to the CFO, Barry M. Deep, business is “looking up.” As a result, the cemetery project will provide a net cash inflow of $145,000 for the firm during the first year, and the cash flows are projected to grow at a rate of 4 percent per year forever. The project requires an initial investment of $1,900,000. a.If the company requires a 11 percent return on such undertakings, should the cemetery business be started?   b. The company is somewhat unsure about the assumption of a growth rate of 4 percent in its cash flows. At what constant growth rate would the company just break even if it still required a return of 11 percent on investment?

The Yurdone Corporation wants to set up a private cemetery business. According to the CFO, Barry M. Deep, business is "looking up." As a result, the cemetery project will provide a net cash inflow of $107,000 for the firm during the first year, and the cash flows are projected to grow at a rate of 3 percent per year forever. The project requires an initial investment of $1,600,000.      What is the NPV for the project if the company's required return is 12 percent? If the company requires a return of 12 percent on such undertakings, should the cemetery business be started? The company is somewhat unsure about the assumption of a growth rate of 3 percent in its cash flows. At what constant growth rate would the company just break even if it still required a return of 12 percent on investment?