a)A project has 6 million cashflow each year for 5years, payback period of 4 years and
Verify your answer with an appropriate Excel function. Indicate whether you should
proceed with the project.
(b) A company is evaluating two mutually exclusive projects A and B, and both have
conventional cashflows (i.e. all inflows after the initial outflow). Project A has an
of 14% and the NPV profiles of Project A and Project B cross-over at 10%.
Illustrate, using a graph or any other means, the range of values of cost of capital, when
the NPV rule and IRR rule will not lead to the same decision.
(c) Discuss the multiple issues of using IRR as a decision rule for choosing a project.
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- Below are four cases that you will have to solve using Excel spreadsheets. 2nd case The COMPETIDORA SA company has the possibility of investing in three different projects . The projections show us the following information on which a decision must be made: PROJECT X Y Initial Z$310,000 It is requested: investment $180,000 $250,000 Year 1 cash flows $50,000 $80,000 $150,000 1. Determine the internal rate of return. 2. Determine the present value. Year 2 cash flows 3. Determine the recovery period. 4. Define which is the most viable project. $70,000 $80,000 $120,000 The discount rate for the project will be 9% and the investors propose a MARR of 22%. Year 3 cash flows $80,000 $80,000 $100,000 Year 4 cash flows $100,000 $80,000arrow_forward(Related to Checkpoint 11.4) (IRR calculation) Determine the internal rate of return on the following project: An initial outlay of $9,500 resulting in a cash inflow of $1,600 at the end of year 1, $4,700 at the end of year 2, and $7,800 at the end of year 3. This project's internal rate of return is %. (Round to two decimal places.)arrow_forwardA project has cash flows of –$148,000, $43,000, $87,000, and $51,500 for Years 0 to 3, respectively. The required rate of return is 11 percent. Based on the internal rate of return of Blank 1 percent for this project, you should Blank 2 the project. Enter your answer in the first blank as a percent rounded to 2 decimal places, e.g., 32.16. Also enter either "accept" or "reject" in the second blank.arrow_forward
- After analysing the financial data of Q-Constructions, you notice that they are trending in the right direction. A new 12-month construction proposal has come to the company worth $1,000,000 and an important question is whether it will be financially viable. They want you to analyse the proposal, in particular, the recommended cash flow schedule and to understand the key financial points during the construction project. The following cash flow schedule is summarised below. To ensure that all upfront and on-going outlay costs are covered in advance, Q-Constructions incur an initial start-up cost of $200,000. The proposal states that they will receive a deposit from the client of 10% of the total project price at the beginning. They then receive four equal instalment payments of 20% of the total project price associated to project milestones from the client at the end of the 2nd, 6th, 8th and 10th month. Finally, they receive the last 10% project milestone on lock-up which occurs at the…arrow_forwardWhen inputting an answer, round your answer to the nearest 2 decimal places. If you need to use a calculated number for further calculations, DO NOT round until after all calculations have been completed. For the final answer, Round to 2 decimal places. A firm has a WACC of 8.35% and is deciding between two mutually exclusive projects. Project A has an initial investment of $63.06. The additional cash flows for project A are: year 1 = $17.78, year 2 = $38.17, year 3 = $46.29. Project B has an initial investment of $72.12. The cash flows for project B are: year 1 = $52.25, year 2 = $37.11, year 3 = $33.12. Calculate the Following: Payback Period for Project A: Payback Period for Project B: NPV for Project A: NPV for Project B: If can't solve all pls skip it i dont need your answer then i wil definitely like for complete answer and skip if you can't.arrow_forwardPlease help mearrow_forward
- Below are four cases that you will have to solve using Excel spreadsheets. 1st case The company COMERCIAL SA has two investment alternatives that present the following information: PROJECT A B It is requested Initial investment. $25,000 $22,000 Cash flows year 1 1. Determine the internal rate of return. 2. Determine the present value. $7,000 $12,000 The discount rate for the project will be 10% and the MARR will be 20%. 3. Determine the recovery period. 4. Define which is the most viable project. Year 2 cash flows $15,000 $8,000 Year 3 cash flows $18,000 $12,000arrow_forwardThe Michner Corporation is trying to choose between the following two mutually exclusive design projects: Year Cash Flow (I) Cash Flow (II) 0 -$ 76,000 -$ 34,000 1 29,000 11,000 23,500 17,500 2 3 36,000 42,000 a-1. If the required return is 12 percent, what is the profitability index for each project? Note: Do not round intermediate calculations and round your answers to 3 decimal places, e.g., 32.161. a-2. If the company applies the profitability index decision rule, which project should it take? b-1. If the required return is 12 percent, what is the NPV for each project? Note: Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. b-2. If the company applies the net present value decision rule, which project should it take? a-1. Project I a-2. Project II b-1. Project I b-2. Project IIarrow_forwardPlease provide correct solution for correct answerarrow_forward
- Solve the attahment.arrow_forwardConsider the following projects, X and Y where the firm can only choose one. Project X costs $1500 and has cash flows of $678, $652, $347, $111, $54, $16 in each of the next 6 years. Project Y also costs $1500, and generates cash flows of $738, $693, $405 for the next 3 years, respectively. WACC=11%.A) Draw the timelines for both projects: X and Y.arrow_forwardAfter analysing the financial data of Q-Constructions, you notice that they are trending in the right direction. A new 12-month construction proposal has come to the company worth $1,000,000 and an important question is whether it will be financially viable. They want you to analyse the proposal, in particular, the recommended cash flow schedule and to understand the key financial points during the construction project. The following cash flow schedule is summarised below. To ensure that all upfront and on-going outlay costs are covered in advance, Q-Constructions incur an initial start-up cost of $200,000. The proposal states that they will receive a deposit from the client of 10% of the total project price at the beginning. They then receive four equal instalment payments of 20% of the total project price associated to project milestones from the client at the end of the 2nd, 6th, 8th and 10th month. Finally, they receive the last 10% project milestone on lock-up which occurs at the…arrow_forward
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