a) Define NPV (Net Present Value), Payback and IRR (Internal rate of Return). b) Calculate NPV of the following projects. Discount rate is 10%. c) Which project should be chosen and why?
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- Capital investment Annual 0&M costs Electricity sales Decommissioning 50MW onshore €40k per 2MW ЄЗM for 5-10 €c wind farm per kWh €65M machine • Assume wind farm operates for 20 years • 110GWH @ 7.5 €c/kWh gives 8.2M€ annual income • 25×2MW wind turbines gives annual expenditure 1M€ • Discount rate = 8% Find net present value for the wind farm? Find LCOE for the wind farm?A company invests $6,250 at the beginning ofa seven-year project. At the end of every year forthe first five years, the project generates $1,550. Atthe end of the sixth year, the project generates nomoney. At the end of the seventh year, the project isterminated. How much must the project generate atthe end of the seventh year to realize 14% return onthe initial investment?. Connor Corporation is considering two projects (see below). For your analysis, assume these projects are mutually exclusive with a required rate of return of 10%. Project 1 Project 2 Initial investment $(465,000) $(700,000) Cash inflow Year 1 $510,000 $850,000 Compute the following for each project: NPV (net present value) PI (profitability index) IRR (internal rate of return) Based on your analysis, answer the following questions : Which is the best choice? Why? Which project should be selected and why? If the projects had the same IRR amounts but different NPV totals, then how would you know which project to select? Explain.
- Please use excel to solve and show equations. A project is being evaluated. The project will create the following cash flows: Year Cash Flow 0 $ 1,290,000 1 465,000 2 530,000 3 425,000 4 380,000 In an attempt to improve its economy, the Erewhonian government has declared that all cash flows created by a foreign company are blocked and must be reinvested with the government for one year. The reinvestment rate for these funds is 3 percent. If Anderson uses a required return of 12 percent on this project, what are the NPV and IRR of the project? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. Enter your IRR as a percent.) Whats is the NPV and IRR of the project of the project? Please use excel to solve and show equations.Compute the IRR statistic for Project E. The appropriate cost of capital is 8 percent. (Do not round intermediate calculations and round your final answer to 2 decimal places.) Project E Time: Cash flow: 0 -$1,000 $350 1 2 3 4 5 $480 $520 $300 $100 IRR % Should the project be accepted or rejected? O accepted O rejectedA project has the cash flows shown in the cash flow diagram below, where the time periods are in years and all cash flows occur at once at the end of each year. What is the project's conventional payback period in years? a. 1 year b. 2 years c. 3 years d. 4 years e. 5 years $20K $20K $15K $15K TH 1 2 3 4 $10K $25K 5
- 14. Two projects are under consideration. Year A B 0 ($3,400) ($4,500) 1 $2,750 $1,000 2 $2,750 $2,000 3 $2,750 $5,000 Which project should be selected if the simple payback period method is used to make the determination? Show your work.Solve for ERS 25% Mimimum Attractive Rate of Return 13% Interest Rate External $7.250.00 Excess Expenditure EOY 1 $13,500.00 Investment Capital $4,850.00 Annual Excess of receipts over expenses from EOY 2 to 65. The IRR method assumes that cash flows are reinvested at the IRR. The NPV method assumes that cash flows are reinvested at the required rate of return (market rate). 1 2 3 0 -400 220 410 0 Project B -400 220 190 260 Project A NPV @13% 115.78 123.68 IRR 32.411% 30.00% Adjust project A's cash flows using the reinvestment assumptions and explain why the ranking by different methods differ.
- Problem Solving. Solve the following problems completely. 4. Atty. Gacayan invested P280, 000 which will be used in a project that will produce auniform annual revenue of P180,000 for 5 years and then have a salvage value of 16% ofthe investment. Out-of-pocket costs for operation and maintenance will be P80,000 peryear. Taxes and insurance will be 3% of the first cost per year. Atty Gacayan expectscapital to earn not less than 30% before income taxes. Determine if the investment is goodand Calculate the following:a. Calculate using Rate of Return Method.b. Payback period of the investment.Compute the IRR static for Project E. The appropriate cost of capital is 7 percent. (Do not round intermediate calculations and round your final answer to 2 decimal places.) Project E Time: 0 1 2 3 Cash flow -$3,300 $990 $960 $840 IRR Should the project be accepted or rejected? Rejected O Accepted 4 5 $620 $420Assume thit a company consisting of four divisions is considening three investment projects, A 8 and C A is a proiect of Oivision 1, 8 m a project of Division 2 and Cia project of Division 3 The cost of captal for each division is as follows Cost of capital of Division 1 is 11.75% Cost of capital of Division 2 is 16 43% Cost of capital ol Division 3 is 152 it the retum on project A in 11.0% project B in 175% and project Ca 165% which project(a) will be accepted using the cont of capital derived for each division? Select one Only Proect Only prect A OF Procts A and B Od Pcte B and C