PRIN.OF CORPORATE FINANCE >BI<
12th Edition
ISBN: 9781260431230
Author: BREALEY
Publisher: MCG CUSTOM
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Chapter 12, Problem 19PS
EVA Use the Beyond the Page feature to access the Excel program for calculating the profitability of the Nodhead project. Now suppose that the cash flows from Nodhead’s new supermarket are as follows:
- a. Recalculate economic
depreciation. Is it accelerated or decelerated? - b. Rework Tables 12.2 and 12.3 to show the relationship between (a) the “true”
rate of return and bookROI and (b) true EVA andforecasted EVA in each year of the project’s life.
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You have determined the profitability of a planned project by finding the present value of all the cash flows from that project. Which of the following would cause the project to look more appealing in terms of the present value of those cash flows?
A. The discount rate increases.
B. The cash flows are extended over a longer period of time, but the total amount of the cash flows remains the same.
C. The discount rate decreases.
D. Answers B and C above.
E. Answers A and B above.
Please answer the following questions using the information below:
NPV. Using a 10% required rate of return, calculate the NPV for this project. Should it be accepted or rejected?
PI. Calculate the Profitability Index (PI) for this project. Should it be accepted or rejected?
Consider the following cash flows:
Year 0 1 2 3 4 5 6
Cash Flow -$8,000 $3,000 $3,600 $2,700 $2,500 $2,100 $1,600
Payback. The company requires all projects to payback within 3 years. Calculate the payback period. Should it be accepted or rejected?
Discounted Payback. Calculate the discounted payback using a discount rate of 10%. Should it be accepted or rejected?
IRR. Calculate the IRR for this project. The company’s required rate of return is 10%. Should it be accepted or rejected?
NPV. Using a 10% required rate of return, calculate the NPV for this project. Should it be accepted or rejected?
PI. Calculate the Profitability Index (PI) for this project. Should it be accepted or rejected?…
Compute the cash flows for the project. Use the Data Table function to do a two-way sensitivity analysis on the NPV of the project, varying the discount rates from even percentages 0%, 2%, 4%, 6%, 8% ..., 20% vertically and varying the growth rates from 0%, 2%, 4%, ..., 12% horizontally. Please label the discount rate and growth rate in your data table. Use the table below to help.
Chapter 12 Solutions
PRIN.OF CORPORATE FINANCE >BI<
Ch. 12 - Prob. 1PSCh. 12 - Terminology Define the following: a. Agency costs...Ch. 12 - Prob. 3PSCh. 12 - EVA Here are several questions about economic...Ch. 12 - Accounting measures of performance The Modern...Ch. 12 - Economic income Fill in the blanks: A projects...Ch. 12 - Prob. 7PSCh. 12 - Prob. 8PSCh. 12 - Prob. 9PSCh. 12 - Prob. 10PS
Ch. 12 - Management compensation We noted that management...Ch. 12 - Prob. 12PSCh. 12 - Prob. 13PSCh. 12 - Prob. 14PSCh. 12 - EVA Herbal Resources is a small but profitable...Ch. 12 - Prob. 16PSCh. 12 - Economic income Consider the following project:...Ch. 12 - EVA Use the Beyond the Page feature to access the...Ch. 12 - Accounting measures of performance Use the Beyond...Ch. 12 - EVA Ohio Building Products (OBP) is considering...
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