A firm has a $100 million capital budget. It is considering two projects, each costing $100 million. Project A has an IRR of 20% and an NPV of $9 million; it will be terminated after 1 year at a profit of $20 million, resulting in an immediate increase in EPS. Project B, which cannot be postponed, has an IRR of 30% and an NPV of $50 million. However, the firm’s short-run EPS will be reduced if it accepts Project B because no revenues will be generated for several years. Should the short-run effects on EPS influence the choice between the two projects? How might situations like this influence a firm’s decision to use payback?

All American Telephones Inc. is considering the production of a new cellphone. The project will require an investment of $13 million. If the phone is well received, the project will produce cash flows of $8 million a year for 3 years, but if the market does not like the product, the cash flows will only be $2 million per year. There is a 50% probability of both good and bad market conditions. All AMerican can delay the project a year while it conducts a test to determine whether demand will be strong or weak. The delay will not affect the dollar amounts involved project's investment or its cash flows- only their timing. Because of the anticipated shifts in technology, the 1-year delay means that cash flows will continue only 2 years after the initial investment is made. All-American's WACC is 8%. What action do you recommend?

Hibiscus HQ is considering a project with an initial cost of $320,800. The project will not produce any cash flows for the first two years. Starting in Year 3, the project will produce cash inflows of $194,000 a year for three years. This project is risky, so the firm has assigned it a discount rate of 17.4 percent. What is the project's net present value? -$14,586.20 $-11.793.26 $3,285.94 -$16,930.76 $-21,784.92

Project Falcon has an upfront after-tax cost of $100,000. The project is expected to produceafter-tax cash flows of $35,000 at the end of each of the next four years. The project has aWACC of 11%.However, if the company waits a year, they will find out more information about marketcondition and its effect on the project’s expected after-tax cash flows. If they wait a year,• There’s a 60% chance that the market will be strong and the expected after-tax CFs willbe $45,000 a year for four years.• There’s a 40% chance that the market will be weak and the expected after-tax CFs willbe $25,000 a year for four years.• Project’s initial after-tax cost (at t=1) will still be $100,000.Should the company go ahead with the project today or wait for one more year?   please show work.

All American Telephones Inc. is considering the production of a new cell phone. The project will require an investment of $13 million. If the phone is well received, the project will produce cash flows of $8 million a year for 3 years, but if the market does not like the product, the cash flows will be only $1 million per year. There is a 50% probability of both good and bad market conditions. All American can delay the project a year while it conducts a test to determine whether demand will be strong or weak. The delay will not affect the dollar amounts involved for the project’s investment or its cash flows—only their timing. Because of the anticipated shifts in technology, the 1-year delay means that cash flows will continue only 2 years after the initial investment is made. All American’s WACC is 10%. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the question below.     Open spreadsheet…

All American Telephones Inc. is considering the production of a new cell phone. The project will require an investment of $13 million. If the phone is well received, the project will produce cash flows of $8 million a year for 3 years, but if the market does not like the product, the cash flows will be only $1 million per year. There is a 50% probability of both good and bad market conditions. All American can delay the project a year while it conducts a test to determine whether demand will be strong or weak. The delay will not affect the dollar amounts involved for the project's investment or its cash flows-only their timing. Because of the anticipated shifts in technology, the 1-year delay means that cash flows will continue only 2 years after the initial investment is made. All American's WACC is 9%. What's the NPV without waiting? What's the NPV of waiting 1 year?

General Forge and Foundry Co. is considering a three-year project that will require an initial investment of $40,000. If market demand is strong, General Forge and Foundry Co. thinks that the project will generate cash flows of $29,500 per year. However, if market demand is weak, the company believes that the project will generate cash flows of only $1,750 per year. The company thinks that there is a 50% chance that demand will be strong and a 50% chance that demand will be weak.   If the company uses a project cost of capital of 10%, what will be the expected net present value (NPV) of this project?   -$914   -$972   -$1,143   -$1,257

A company just paid $10 million for a feasibility study. If the company goes ahead with the project, it must immediately spend another $119,793,331 now, and then spend $20 million in one year. In two years it will receive $80 million, and in three years it will receive $90 million. If the cost of capital for the project is 11 percent, what is the project’s NPV?

Giant Equipment Ltd. is considering two projects to invest next year. Both projects have the samestart-up costs. Project A will produce annual cash flows of $42,000 at the beginning of each year foreight years. Project B will produce cash flows of $48,000 at the end of each year for seven years. Thecompany requires a 12% return. a. Which project should the company select and why? b. Which project should the company select if the interest rate is 14% at the cash flows in Project Bis also at the beginning of each year?

You are considering a proposal to produce and market a new sluffing machine. The most likely outcomes for the project are as follows: Expected sales: 125,000 units per year Unit price: $240 Variable cost: $144 Fixed cost: $5,430,000 The project will last for 10 years and requires an initial Investment of $21.78 million, which will be depreciated straight-line over the project life to a final value of zero. The firm's tax rate is 30%, and the required rate of return is 12% However, you recognize that some of these estimates are subject to error. In one scenario a sharp rise in the dollar could cause sales to fall 30% below expectations for the life of the project and, if that happens, the unit price would probably be only $230. The good news is that fixed costs could be as low as $3,620,000, and variable costs would decline in proportion to sales. a. What is project NPV If all variables are as expected? Note: Do not round Intermediate calculations. Enter your answer in thousands not in…