Table 1: Present value factorsTo determine the present value of a single payment received 'n' years from the present(or vice versa)Periods1234567891011121314151617181920Periods1234567891011121314156%9%0.94340.91740.8900 0.84170.83960.79210.7473 0.64990.70500.59630.66510.547016171819200.62740.50190.5919 0.46040.5584 0.42240.52680.38750.4970 0.35550.46880.32620.44230.29920.4173 0.27450.39360.25190.37140.23110.35030.21200.3305 0.19450.3118 0.178410%0.90910.82640.75130.77220.7084 0.6830 0.63550.62090.56450.51320.46650.42410.2255 0.19380.38550.19110.35050.28750.21490.1954 0.16190.3186 0.25670.18690.1685 0.13720.28970.22920.16250.1452 0.11630.26330.2046 0.14130.1252 0.09850.23940.18270.12290.1079 0.08350.2176 0.16310.0930 0.07080.10690.0929 0.0802 0.06000.19780.14560.1799 0.1300 0.0808 0.0691 0.05080.1635 0.1161 0.0703 0.0596 0.04310.1486 0.1037 0.0611 0.0514 0.036512%15%0.89290.86960.79720.75610.7118 0.65759%0.917416%18%0.86210.84750.74320.71820.6407 0.60860.57180.5674 0.49720.50660.43230.45230.40390.36060.3220Table 2: Cumulative present value factors('annuity factors')The table gives the present value of 'n' annual payments of 1 received for the next 'n' years witha constant discount of x% per year. For example, with a discount rate of 8% and with 6 annualpayments of £1 the present value is £4.62296.49516.81370.55230.51580.4761 0.43710.4104 0.37040.31390.3050 0.26600.26300.22670.3759 0.35380.32690.28430.247220%0.83330.69440.57870.48230.40190.334915%16%18%0.8696 0.8621 0.84751.6257 1.6052 1.56562.2832 2.24592.17432.8550 2.79822.69013.3522 3.27433.12723.7845 3.68473.49764.16044.48734.77165.0188 4.8332 4.49414.6065 4.30305.2337 5.0286 4.65605.42065.5831 5.34230.27910.23264.0386 3.81154.3436 4.07766%10%12%0.94341.8334 1.75912.6730 2.53130.90910.89291.7355 1.69012.4869 2.40183.4651 3.23973.1699 3.03734.2124 3.8897 3.7908 3.60484.9173 4.4859 4.3553 4.11145.5824 5.03304.86844.56386.2098 5.5348 5.3349 4.96766.8017 5.9952 5.7590 5.32827.3601 6.4177 6.1446 5.65023.83724.03104.19257.88696.80525.93774.32718.3838 7.16076.19445.1971 4.7932 4.43928.85277.1034 6.42354.9095 4.53277.48699.2950 7.78627.3667 6.62825.7245 5.46755.00814.61065.57555.09164.67555.6685 5.16244.72969.7122 8.0607 7.6061 6.8109 5.847410.1059 8.3126 7.8237 6.9740 5.954210.4773 8.5436 8.0216 7.11966.047210.8276 8.7556 8.2014 7.2497 6.1280 5.817811.1581 8.9501 8.3649 7.3658 6.1982 5.8775 5.31625.7487 5.22234.77465.27324.812211.4699 9.12858.5136 7.46940.16150.13460.11220.09350.07790.06490.05410.04510.03760.03130.026120%0.83331.52782.10652.58872.99063.32553.60464.84356.2593 5.9288 5.3527 4.8696 Question 1 (at home, to practice)You have been asked by Transport for London Ltd. to design a new and more efficient component for thesignaling system of the London Underground. The engineers and other experts you consulted have comeup with four possible projects for its production. All costs and revenues for the two possibilities arerepresented by the patterns of after-tax cash flows as follow (assume no uncertainty):ProjectsInitialinvestmentCash flowCash flowCash flowCash flowCash flowYearA.B.012345AAir wir Nó-922.53.54B9453-93.52.5C-9ن من من من من333D-90.70.70.70.7foreverFor all projects, the appropriate cost of capital is 6%. Calculate the Net Present Value for each projectusing the most appropriate formulae.[Practice using Excel for your calculations, although of course for the exam you will not have Excel!].Which project would you choose and why?Project D seems the best project because it generates positive cash flows forever. Do yourcalculations confirm this? Why?

You have been asked by Transport for London Ltd. to design a new and more efficient component for the signaling system of the London Underground. The engineers and other experts you consulted have come up with four possible projects for its production. All costs and revenues for the two possibilities are represented by the patterns of after-tax cash flows as follow (assume no uncertainty): Projects Initial investment Cash flow Cash flow Cash flow Cash flow Cash flow Year A. B. 0 1 2 3 4 5 A -9 2 2.5 3 3.5 4 B -9 4 3.5 3 2.5 2 C -9 3 3 3 3 3 D -9 0.7 0.7 0.7 0.7 forever For all projects, the appropriate cost of capital is 6%. Calculate the Net Present Value for each project using the most appropriate formulae. [Practice using Excel for your calculations, although of course for the exam you will not have Excel!]. Which project would you choose and why? Project D seems the best project because it generates positive cash flows forever. Do your calculations confirm this? Why?

You have been asked by Transport for London Ltd. to design a new and more efficient component for the signaling system of the London Underground. The engineers and other experts you consulted have come up with four possible projects for its production. All costs and revenues for the two possibilities are represented by the patterns of after-tax cash flows as follow (assume no uncertainty): Projects Initial investment Cash flow Cash flow Cash flow Cash flow Cash flow Year A. B. 0 1 2 3 4 5 A -9 2 2.5 3 3.5 4 B -9 4 3.5 3 2.5 2 C -9 3 3 3 3 3 D -9 0.7 0.7 0.7 0.7 forever For all projects, the appropriate cost of capital is 6%. Calculate the Net Present Value for each project using the most appropriate formulae. [Practice using Excel for your calculations, although of course for the exam you will not have Excel!]. Which project would you choose and why? Project D seems the best project because it generates positive cash flows forever. Do your calculations confirm this? Why?

Entrepreneurial Finance

6th Edition

ISBN:9781337635653

Author:Leach

Publisher:Leach

Chapter6: Managing Cash Flow

Section: Chapter Questions

Problem 9DQ

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Homework i A company is considering three alternative investment projects with different net cash flows. The present value of net cash flows is calculated using Excel and the results follow. Potential Projects. Present value of net cash flows (excluding initial investment) Initial investment. Complete this question by entering your answers in the tabs below. Required A a. Compute the net present value of each project. b. If the company accepts all positive net present value projects, which of these will it accept? c. If the company can choose only one project, which will it choose on the basis of net present value? FI Compute the net present value of each project. Potential Projects Project A Present value of net cash flows Initial investment Net present value 2 Required B W F2 # Required C 3 APR 11 80 F3 $ 4 m tv 6 Project A $ 9,972 (10,000) 2 of 8 c F6 # & 7 Project B $ 10,697 (10,000) F7 Next > Y U il A 8 Project C $ 10,653 (10,000) FB DD ( F9 9 FU O
Q- Explain the below elements of cash inflow: (Note: First one (a) is as example for you) a- Borrowed funds.If you finance your investment by borrowing, the borrowed funds will appear as cash inflow to the project at the time they are borrowed. From these funds, the purchase of new equipment or any other investment will be paid out. b- Operating revenues. c- Cost savings d- Salvage value. e- Working capital recovery at the end of the project.
can you please answer the second part from question b towards the end because an expert already answered the first part Bruin, Inc., has identified the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 –$ 28,700 –$ 28,700 1 14,100 4,150 2 12,000 9,650 3 9,050 14,900 4 4,950 16,500 a-1 What is the IRR for each of these projects? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) a-2 Using the IRR decision rule, which project should the company accept? Project A Project B a-3 Is this decision necessarily correct? Yes No b-1 If the required return is 12 percent, what is the NPV for each of these projects? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) b-2…
QUESTION 1 a) A project requires the purchase of a new piece of machinery. choose between three potential machines (Machine A, Machine B and Machine C), either of which would be You are the project manager and must suitable. The cost of each machine is identical at £1,634,500. However, they differ in performance such that the projected future cash flows are different for each machine. Projected cash flows over a 5 year period are shown in Table Qla:. Year Cash Flow: Cash Flow: Cash Flow: Machine A Machine B Machine C -£1,634,500 -£1,634,500 -£1,634,500 950,000 950,000 200,000 2 700,500 684,500 280,000 3 560,500 600,000 440,000 4 240,000 575,000 600,000 800,000 5 130,000 550,000 Table Qla. Show the Payback Period and Total Income for each machine (Machine A, Machine B and Machine C). NOTE: ALL calculations must be shown. (i) (ii) For each machine (Machine A, Machine B and Machine C) calculate Return on Investment (ROI). NOTE: ALL calculations must be shown. (iii) For each machine…
Question The following economical indictors are referring to types of project (A and B). Answer the following points according to these given indictors in the tables. project A:r=8% project B: r=8% year cash flow (CF) year cash flow (CF) 0 -598 0 -384 1 110 1 105 2 170 2 105 3 210 3 95 4 320 4 118 A) If you are aware that( r%) percentages are various for different reasons to be (10% and 20%). So determine level of NPV during your analysis procedures for whole the mentioned cases of (% r) for each project? B) Which one of the mentioned project are more economically by using concept of IRR and take the range of (% r) between (9% to %25) for supporting your answers? C) Drawing out all the levels of various of the project for each cases of (r %) which given initially in point (A) above. D) Give clear justification about any of the above project more feasible?
Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 −$29,000 −$29000 1 14,400 4,300 2 12,300 9,800 3 9,200 15,200 4 5,100 16,800 a) What is the Internal Rate of Return (IRR) for each of these projects? b) Using the IRR decision rule, which project should the company accept? c) If the required return is 11 percent, what is the Net Present Value (NV) for each of these projects? d) Using the NPV decision rule, which project should the company accept? e) Why do you think the NPV and IRR rules do not agree on same project approval/rejection direction?
A*) You are hired as financial manager in Abis Investment Co., you made cash flow projection for two different projects. You are asked to estimate the feasibility of the projects by using the following investment criteria: NPV, IRR, MIRR and BCR. They are mutually exclusive. Show all your calculation. The details of that projects are given below: Year 0 1 2 3 4 5 Project A -1,000 1,200 4600 1,800 -8,000 5,000 Project B -2,000 1,000 3600 800 8,000 500 Discount rates 12% 13% 12% 14% 15% 11%
Year Cash Flow (A) Cash Flow (B) 0 −$29,000 −$29,000 1 14,400 4,300 2 12,300 9,800 3 9,200 15,200 4 5,100 16,800 What is the IRR for each of these projects? Using the IRR decision rule, which project Should the company accept? Is this decision necessarily, correct?
Bruin, Incorporated, has identified the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 -$36,400 -$ 36,400 1 18,710 6,310 14,210 12,810 11,710 19,310 8,710 23,310 a. What is the IRR for Project A? 234 IRR b. What is the IRR for Project B? IRR
Fransico Ltd. is trying to determine which of three projects it wants to invest in. All three projects have been analyzed into Net Present Value amounts. (Round your answers to two decimal places when needed and use rounded answers for all future calculations). 1. Calculate the Net Present Value based on the following information: Cash Flows Project 2 Project 6 Project 12 Present Value of net cash inflows $491,900 $778,300 $503,700 Initial InvestmentSingle line $146,000Single line $407,400Single line $206,400Single line Single lineNet Present ValueDouble line Single lineDouble line Single lineDouble line Single lineDouble line 2. Calculate the Profitability Index for each of the projects. Round to two decimal places. Project Present value of net cash inflows / Initial Investment = Profitability Index 2 / = 6 / = 12 / = 3. Based on the Profitability Index, which project should be selected?
QUESTION 1 Suppose that you are working as a capital budgeting analyst in a finance department of a firm and you are going to evaluate two mutually exclusive projects by implementing different capital budgeting techniques. The cash flows for these two projects are given below. CASH FLOW (A) -$17,000 8,000 7,000 5,000 3,000 CASH FLOW (B) -$17,000 2,000 5,000 9,000 9,500 YEAR 3 4 1 Calculate the Payback Period of each project. Which project should you accept according to this method? Explain whether the Payback Period is or is not an appropriate method in this case.
Consider the following two sets of project cash flows:Project Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6DiscountRateX -903 175.6 169.8 201.4 251.5 299.2 305.2 0.1037Y -513 190.5 195.5 90.5 80.5 85.5 110.5 0.1037A) Assume that projects X and Y are mutually exclusive. The correct investment decision andthe best rational for that decision is to:i) invest in Project Y since IRRY > IRRX.ii) invest in Project Y since NPVY > NPVX.iii) neither of the above.B) What are the incremental IRR and NPV of Project X?C) Is the use of the incremental measures in B) appropriate to your evaluation of thepreferred project? Explain.D) Which is the preferred project? Explain and justify the basis for your choice.(6 marks)2) Due to the demands of the new ATO Single Tough Reporting System, a successful manufacturingcompany is assessing the introduction of a new computer system to improve regulatory reportingcompliance. The managing director wants to install a new Pay Perfect system, whereas the…