ff2 Agape Mining Inc. is evaluating a project with the following cash flows:Year Cashflow 0-$380,000,000.00 1 $79,000,000.00 2 $82,000,000.00 3-$53,000,000.00 4 $175,000,000.00 5 $195,000,000.00 6-$40,000,000.00 7 $188,000,000.00 8 $71,000,000.00 - Construct aspreadsheet and calculate the following (the required rate of return is11%): o Payback period o Discounted payback period o Internal rate ofreturn (IRR) o Modified IRR. The discounting approach. The reinvestmentapproach. The combination approach o Net present value (NPV) - Basedon your analysis, should the company take the project? Why?

Capital Budgeting is the technique for evaluating various projects in terms of profitability of the…

Answered: Agape Mining Inc. is evaluating a…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Agape Mining Inc. is evaluating a project with the following cash flows: Year Cashflow 0 -$380,000,000.00 1 $79,000,000.00 2 $82,000,000.00 3 -$53,000,000.00 4 $175,000,000.00 5 $195,000,000.00 6 -$40,000,000.00 7 $188,000,000.00 8 $71,000,000.00 - Construct a spreadsheet and calculate the following (the required rate of return is 11%): o Payback period o Discounted payback period o Internal rate of return (IRR) o Modified IRR ▪ The discounting approach ▪ The reinvestment approach ▪ The combination approach o Net present value (NPV) - Based on your analysis, should the company take the project? Why? let the solution be detailed
Agape Mining Inc. is evaluating a project with the following cash flows: Year 0 1 2 3 4 5 6 7 8 Cashflow -$380,000,000.00 $79,000,000.00 $82,000,000.00 -$53,000,000.00 $175,000,000.00 $195,000,000.00 -$40,000,000.00 $188,000,000.00 $71,000,000.00 Construct a spreadsheet and calculate the following (the required rate of return is 11%): o Payback period o Discounted payback period o Internal rate of return (IRR) Modified IRR o . The discounting approach The reinvestment approach The combination approach o Net present value (NPV) Based on your analysis, should the company take the project? Why?
Belgravia Petroleum Inc. is trying to evaluate a generation project with the following cash flows: Year Cashflow 0 -$300,000,000 1 2 3 4 5 6 7 8 $63,000,000 $85,000,000 -$50,000,000 $154,000,000 $157,000,000 -$50,000,000 $70,000,000 $72,000,000 - Construct a spreadsheet and calculate the following (the required rate of return is 7%): o Payback period o Discounted payback period o Net present value (NPV) o Modified IRR The discounting approach ▪ The reinvestment approach . The combination approach Based on your analysis, should the company take the project? Why?
The internal rate of return (IRR) refers to the compound annual rate of return that a project generates based on its up-front cost and subsequent cash flows. Consider the case of Blue Llama Mining Company: Blue Llama Mining Company is evaluating a proposed capital budgeting project (project Sigma) that will require an initial investment of $850,000. Blue Llama Mining Company has been basing capital budgeting decisions on a project's NPV; however, its new CFO wants to start using the IRR method for capital budgeting decisions. The CFO says that the IRR is a better method because returns in percentage form are easier to understand and compare to required returns. Blue Llama Mining Company's WACC is 8%, and project Sigma has the same risk as the firm's average project.
Filter Corp. has a project available with the following cash flows: TT Year Cash Flow -$13,800 6,700 8,000 3,900 3,500 1 2 3 4 What is the project's IRR? Multiple Cholce 29.76% 25.51% 28.34% 26.57% 27.63%
Millano Company is considering a project that has the following cash flow data. What is the project's IRR? Year 0 1 2 3 Cash flows −$123,400 $36,200 $54,800 $48,100 a. 5.96% b. 6.04% c. 6.09% d. 5.93% e. 6.13%
PharmPic is considering the following project with the following cash flows: PharmPic Project Period Cash Flow 0 -$50,000 1 -$7,000 2 -$40,000 3 $10,000 4 $5,000 5 $20,000 6 $25,000 7 $32,000 8 $37,000 DosageDoc is considering the following project with the following cash flows: DosageDoc Project Period Cash Flow 0 -$50,000 1 70,000 2 -40,000 3 30,000 4 -7,000 PharmPic Project’s cash flows are semi-annually. PharmPic has the following two financing choices; loan with an APR of 6.5% compounding semi-annually or a loan with an APR of…
ABC company is considering whether or not to invest in a project. The project cash flows are shown in the following table: Period 0 1 2 3 What is the IRR of this investment? O 9.4% O 10.8% Project Cash Flows -$7,200,000 $900,000 $930,000 $7,650,000 O 11.5%
A company is evaluating three possible investments. The following information is provided by the company: Project A Project B Project C Investment $238,000 $54,000 $238,000 Residual value 0 30,000 40,000 Net cash inflows: Year 1 70,000 30,000 100,000 Year 2 70,000 21,000 70,000 Year 3 70,000 17,000 80,000 Year 4 70,000 14,000 40,000 Year 5 70,000 0 0 What is the payback period for Project A? (Assume that the company uses the straight−line depreciation method.) (Round your answer to two decimal places.) A. 1.8 years B. 2.4 years C. 5.00 years D. 3.4 years
A company has a project available with the following cash flows: Year 0 1 2 3 4 Cash Flow -$ 35,990 12,570 14,740 19,660 11,000 If the required return for the project is 7.9 percent, what is the project's NPV? Multiple Choice $21,980.00 $11,078.65 $3,970.46 $12,085.80 $13,812.35
A company has a project available with the following cash flows: Year 0 2234O 1 Cash Flow -$36,470 12,510 14,740 19,520 10,880 If the required return for the project is 7.7 percent, what is the project's NPV?
Compute the NPV based on the following data Life of project 10.00 year Required Investment 500,000.00 Required Rate of Return 8% Required Working Capital to be released at the end of the project 35,000.00 Salvage value of equipment at end of year 10 12,000.00 Required overhaul in year 5 60,000.00 Annual increase in net income for this project 85,000.00 Year Cash flow 0 1 2 3 4 5 6 7 8 9 10 Net Present Value IRR Should we accept this project:?

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