You are looking to assess the income for a project, and in the best case (optimistic) you expect and income of $7.37k, likely you'll see an income of $2.44k and at worst you will see no income. If you were looking to put this income figure into a risk mitigated economic assessment, what number would you enter based on what was taught in the class? Enter this answer below in "k" dollars, i.e. $7.37k would be entered as 7.37 correct to 2 decimal places.
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- As a financial analyst, you are tasked with evaluating a capital-budgeting project. You were instructed to use the IRR method, and you need to determine an appropriate hurdle rate. The risk-free rate is 4%, and the expected market rate of return is 11%. Your company has a beta of 0.75, and the project that you are evaluating is considered to have risk equal to the average project that the company has accepted in the past. According to CAPM, the appropriate hurdle rate would be A. 15%. B. 9.25%. C. 4%. D. 11%. E. 0.75%You have two projects that met the payback period and accounting rate of return screeningsidentically. Project 1 produced an NPV of Php 450,000 and had an IRR between 5% and 8%.Project 2 produced a NPV of Php 350,000 and had an IRR of 10%. This leaves you with a difficultchoice, since each alternative has a measurement that exceeds the other and the other variablesare the same. Which project would you invest in and why?You are a financial analyst for the Brittle Company. The director of capital budgeting has asked you to analyze two proposed capital investments: Projects X and Y. Each project has a cost of $10,000, and the cost of capital for each is 12%. The projects' expected net cash flows are shown in the table below. Use the Homework Student Workbook to calculate each project's net present value (NPV), internal rate of return (IRR), modified internal rate of return (MIRR), and profitability index (PI). NPVx = NPVy = IRRx = IRRy = TVx = TVy = MIRRx = MIRRy = PVx = PVy = PIx = PIy = 2. Which project or projects should be accepted if they are independent? 3.Which project or projects should be accepted if they are mutually exclusive?
- You and another analyst are asked to choose between two projects. Your manager tells you that the opportunity cost of capital is 10%. The other analyst points out that Project B has an IRR of 37.3%, which is much higher than Project A’s IRR of 24.7%, so he thinks Project B is the better project. Do you agree or disagree? Explain your answer. If you disagree with the intern, explain why the other analyst’s logic is incorrect.Your boss wants you to conduct a sensitivity and scenario analysis to determine whether the following project is a winner. You are entering an established market, and you know the market size will be 1,100,000 units. You are unsure of your exact market share, the price you will be able to charge, and your variable cost per unit, but have determined a range of possible values for each (in the table below). Your initial investment cost is $150 million, and that investment will depreciate in straight-line form over the 20-year life of the project. There are no new NWC requirements, and there will be no salvage value at the end of the 20 years. The tax rate is 35%. The discount rate is 18%. a) Use the following table to conduct a full sensitivity analysis for the project. Make sure to include the NPV for the expected outcome as part of the full sensitivity analysis. Also add the best- and worst-case scenarios to the full sensitivity analysis. Show all of your work (written out, not an…FB Company is considering investing in two construction projects, and he developed the following estimates of the cash flows. His required return is 10% and views these projects as equally risky. Required: a) Calculate the net present value (NPV) of each project, assess its acceptability, and indicate which project is best using NPV. b) Calculate the profitability index (PI) of each project, assess its acceptability, and indicate which project is best using PI. c) If both the projects have recorded a positive NPV value and the projects are mutually exclusive, which projects would you recommend for FB Company to undertake? Why?
- Suppose that you are working on a product development venture and your best guess about the cost and revenue is as follows: you expect to spend $2 million on inventories and marketing in the near future (so you can treat all the expenses as immediate cash outlays) but you expect to receive $2.3 million of revenue in two years. Note that the # is an expected amount that is an average of the optimistic scenarios and pessimistic scenarios. This is also simplified to make the set-up easy. What is your expected return on this venture (in terms of a per year rate of return? In other words, what is the IRR?Suppose you are a small business owner and are considering investing in a new project that has an expected cash flow of $100,000 in year 1, $150,000 in year 2, and $250,000 in year 3. The initial investment required for the project is $400,000. You have a required rate of return of 10% for this project. Is it a good investment? Justify your investment decision. b) After further careful evaluation, you ascertain that the required rate of return for a similar industry project is 7%. Re-evaluate the investment opportunity using the new required rate of return. Does your recommendation change?Huang Industries is considering a proposed project whose estimatedNPV 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 ascenario analysis and obtained these results: Calculate the project’s expected NPV, standard deviation, and coefficient of variation.
- Please show all work on excel. You just got hired by McKinsey & Company as a financial consultant and they’re paying you an egregious amount of money. Accordingly, they have you working on the tough projects – like this one… Consider the following two mutually exclusive projects available to the firm. Free cash flows for Projects A and B are provided below. Assume the two projects have essentially the same level of riskiness, and your prior analysis indicates that the appropriate risk-adjusted hurdle rate (i.e., the WACC) is 7.45% for both projects. Perform the analysis below and make a recommendation as to which project to pursue. Year 0 1 2 3 4 5 6 Project A -$3,200 $700 $700 $700 $700 $700 $700 Project B -$600 $58 $58 $695 B. Compute the NPV for both projects using the crossover rate as the discount rate. What do you find? c. Compute the NPV for each project (using the WACC of 7.45% as the discount rate). Based on NPV, which project should be selected? Note:-…As an staff at company, you are considering two projects which project A has an initial investment of $100,000 and yearly revenue of $17, 600 for 10 years, and Project B has an initial investment of $51,000 and yearly revenue of $10, 100 for 10 years. What is the point of indifference? Which project would you accept at a WACC of 16.0%? a) Point of indifference does not exist, accept project B b)Point of indifference at 8.60%, accept both Project A and Project B c) Point of indifference at 8.60%, don't accept Project A and don't accept ProjectB d) Point of indifference at 14.84%, accept Project B. e) Point of indifference at 11.86%, accept Project B f)Point of indifference at 11.86%, accept Project ACompanies are presented with viable alternatives that sometimes produce nearly identical results and profitability goals. If they have the ability to invest in both alternatives, they may do so. But what about when resources are constrained? How do they choose which investment is best for their company? Consider this: you have two projects that met the payback period and accounting rate of return screenings identically. Project 1 produced an NPV of $45,000 and had an IRR between 5% and 8%. Project 2 produced a NPV of $35,000 and had an IRR of 10%. This leaves you with a difficult choice, since each alternative has a measurement that exceeds the other and the other variables are the same. Which project would you invest in and why?