d. If the opportunity cost of capital is 10%, which projects have positive NPVs? e. “If a firm uses a single cutoff period for all projects, it is likely to accept too many shortlived projects." True or false?
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- Spreadsheet Link What is the IRR of the following project?Cash FlowYear0 -32,0001. 9,0002. 10,0003. 15,0004. 7,800 1). 10.8% 2). 11.2% 3). 11.7%4). 12.0% 5). 12.3%11:52 Investment Appraisal (Year 2 Column 2... £393,460 7. Based on NPV which project would you ассept? Net Cash F Net Cash F Net Cash F Project 2 (110,000) (105,000) 35,000 35,000 Project 3 (116,000) 40,000 40,000 40,000 40,000 40,000 84,000 Project 1 Year 0 Year 1 25,000 Year 2 20,000 Year 3 35,000 35,000 Year 4 35,000 35,000 70,000 45,000 Year 5 35,000 50,000 Project 1 Project 2 Project 3 8. When calculating NPV will using a higher discount factor lead to ...? Activity Chat Teams Assignments MorePROJECT A PROJECT BInitial Outlay -60,000 -80,000Inflow year 1 17,000 18,000Inflow year 2 17,000 18,000Inflow year 3 17,000 18,000Inflow year 4 17,000 18,000Inflow year 5 17,000 18,000Inflow year 6 17,000 18,000
- Look at the cash flows for projects F and G given below. Cash Flows ($) NPV IRR at Project со F G C1 C2 C3 C4 (15,000) 7,200 7,200 7,200 Ө (15,000) 3,600 3,600 3,600 3,600 3,600 3,600 3,600 3,600 17.3 4,206 C5 C6 C7 Cg (%) 10% 0 Ө Ө Ө 20.7 2,905 The cost of capital was assumed to be 10%. Assume that the forecasted cash flows for projects of this type are overstated by 7% on average. That is, the forecast for each cash flow from each project should be reduced by 7%. But a lazy financial manager, unwilling to take the time to argue with the projects' sponsors, instructs them to use a discount rate of 17%. a. What are the projects' true NPVs? (Do not round intermediate calculations. Round your answers to nearest dollar amount.) Project F Project G NPV at 10% b. What are the NPVs at the 17% discount rate? (Do not round intermediate calculations. Round your answers to nearest dollar amount.) Project F Project G NPV at 17%Spreadsheet Link What is the IRR of the following project? Cash Flow Year 0 32.000 9,000 1. 2 10,000 15,200 7,800 4. 1) 10.8% 2) 11.2% • 3) 11.7% 4) 12.0% 5) 12.3% 234Details WACC 0 SGWN-O 1 2 3 4 5 6 7.80% Project A Project B -1225 395 402 423 432 489 512 -2146 592.5 603 634.5 648 733.5 768 1. Construct NPV profile table by using cashflows from Project A and B above. 2. Draw NPV profile 3. Compute crossover rate To receive EC your work has to be done in Excel.
- NPV and IRR Analysis Cummings Products Company is considering two mutually exclusive investments whose expected net cash flows are as follows: EXPECTED NET CASH FLOWS Year Project A Project B -$340 -$630 -528 210 -219 210 3 -150 210 1,100 210 820 210 990 210 -325 210 a. Construct NPV profiles for Projects A and B. Select the correct graph. A B VPVS) 1400 VPV(S) VPV(S) 1400 1400- 1200 1200- 1200- 1000 1000 1000 800 Project B 800- Project A 800 Project A 600 600- 600 400 400- Project A Project B 400 200 200 Project B 200 Cost of capiar5 20 -5 30 -5 5 +++ 10 20 25 30 -5 15 Cost of cntal% -200 Cost of capital %) 20 25 30 -200 -200 -400 -4001 -400I D VPVS) TConsider projects A and B: Cash Flows (dollars) Project A Co -30,500 C1 C2 21,400 21,400 NPV at 11% +$6,148.00 B -50,500 33,500 33,500 + 6,869.53 a. Calculate IRRS for A and B. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Project A B IRR % % b. Which project does the IRR rule suggest is best? O Project A ○ Project B c. Which project is really best? ○ Project A O Project B kB O Points: 0 of 1 Save You are choosing between two projects. The cash flows for the projects are given in the following table ($ million): Project A B Year 0 - $52 - $99 Year 1 $26 $20 Year 2 $19 $40 a. What are the IRRS of the two projects? b. If your discount rate is 4.8%, what are the NPVs of the two projects? c. Why do IRR and NPV rank the two projects differently? a. What are the IRRS of the two projects? The IRR for project A is %. (Round to one decimal place.) Year 3 $22 $50 Year 4 $15 $59
- Q1. The following two projects are made available for your analysis: A B -75,000 30,000 27,000 38,000 Year 0 1 2 3 What is the crossover-rate two projects? A. 8.948% B. 7.924% C. 9.456% D. 8.234% -55,000 22,000 13,200 36,667 for theseLook at the cash flows for projects F and G given below. Cash Flows ($) Project Co F G NPV IRR at C4 C6 C7 Cg C1 C2 C3 (6,000) 4,400 4,400 4,400 ( % ) 10% 52.8 4,942 0 0 0 0 (6,000) 2,200 2,200 2,200 2,200 2,200 2,200 2,200 2,200 32.9 5,737 Project F Project G The cost of capital was assumed to be 10%. Assume that the forecasted cash flows for projects of this type are overstated by 8% on average. That is, the forecast for each cash flow from each project should be reduced by 8%. But a lazy financial manager, unwilling to take the time to argue with the projects' sponsors, instructs them to use a discount rate of 18%. a. What are the projects' true NPVs? (Do not round intermediate calculations. Round your answers to nearest dollar amount.) Project F Project G NPV at 10% C5 0 b. What are the NPVs at the 18% discount rate? (Do not round intermediate calculations. Round your answers to nearest dollar amount.) NPV at 18%Project X cash flows is given on the timeline below 0. 2. 3 4. Project X -$10,000 $6.500 $3,000 $3.000 $1.000 Calculate Project X NPV if WACC-9% Round your answer to the nearest hundredth, have at least two decimal digits and write it in the Answer field. Would you accept or reject the project (write in the textbox below the answer field)?