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complete the following problems from chapters 17 and 18,Find the net present value (NPV) and profi tability




Using Excel, complete the following problems from chapters 17 and 18 in the textbook;P17-1;P17-5;P17-6;P17-10;P17-11;P18-3;P18-7;P18-8;P18-9;You are not required to submit this assignment to Turnitin, unless otherwise directed by your instructor. If so directed, refer to the Student Success Center for directions. Only Word documents can be submitted to Turnitin.;1. Find the net present value (NPV) and profi tability index (PI) of a;project that costs $1,500 and returns $800 in year one and $850 in;year two. Assume the project?s cost of capital is 8 percent.;5. For the following projects, compute NPV, IRR, MIRR, PI, and;payback. If these projects are mutually exclusive, which one(s);should be done? If they are independent, which one(s) should be;undertaken?;i. A B C D;Year 0 2 1,000 2 1,500 2 500 2 2,000;Year 1 400 500 100 600;Year 2 400 500 300 800;Year 3 400 700 250 200;Year 4 400 200 200 300;Discount rate 10% 12% 15% 8%;6. The Sanders Electric Company is evaluating two projects for;possible inclusion in the fi rm?s capital budget. Project M will;require a $37,000 investment while project O?s investment will be;$46,000. After-tax cash infl ows are estimated as follows for the two;projects;YEAR PROJECT M PROJECT O;1 $12,000 $10,000;2 12,000 10,000;3 12,000 15,000;4 12,000 15,000;5 15,000;a. Determine the payback period for each project.;b. Calculate the NPV and PI for each project based on a 10;percent cost of capital. Which, if either, of the projects is;acceptable?;c. Determine the IRR and MIRR for Projects M and O.;10. A machine can be purchased for $10,500, including transportation;charges, but installation costs will require $1,500 more. The;machine is expected to last four years and produce annual cash revenues;of $6,000. Annual cash operating expenses are expected to be;$2,000, with depreciation of $3,000 per year. The fi rm has a 30;percent tax rate. Determine the relevant after-tax cash fl ows and;prepare a cash fl ow schedule.;11. Use the information in Problem 10 to do the following;a. Calculate the payback period for the machine.;b. If the project?s cost of capital is 10 percent, would you;recommend buying the machine?;c Estimate the IRR for the machine.;3. Stern?s Stews, Inc., is considering a new capital structure. Its;current and proposed capital structures are the following;CURRENT PROPOSED;Total assets $150 million $150 million;Debt 25 million 100 million;Equity 125 million 50 million;Common stock price $50 $50;Number of shares 2,500,000 1,000,000;Interest rate 12% 12%;Stern?s Stews? president expects next year?s EBIT to be $20 million, but;it may be 25 percent higher or lower. Ignoring taxes, perform an EBIT/;eps analysis. What is the indifference level of earnings before interest;and taxes? Should Stern?s Stews change its capital structure? Why?;7. Here are the income statements for Genatron Manufacturing;Corporation for 2013 and 2014;INCOME STATEMENT 2013 2014;Net sales $1,300,000 $1,500,000;Cost of goods sold 780,000 900,000;Gross profi t $520,000 $600,000;General and administrative 150,000 150,000;Marketing expenses 130,000 150,000;Depreciation 40,000 53,000;Interest 45,000 57,000;Earnings before taxes $155,000 $190,000;Income taxes 62,000 76,000;Net income $93,000 $114,000;Assuming one-half of the general and administrative expenses are fi xed;costs, estimate Genatron?s DOL, DFL, and DCL in 2013 and 2014.;8. The Nutrex Corporation wants to calculate its weighted average;cost of capital (WACC). Its target capital structure weights are 40;percent long-term debt and 60 percent common equity. The beforetax;cost of debt is estimated to be 10 percent and the company is in;the 40 percent tax bracket. The current risk-free interest rate is 8;percent on Treasury bills. The expected return on the market is 13;percent and the fi rm?s stock beta is 1.8.;a. What is Nutrex?s cost of debt?;b. Estimate Nutrex?s expected return on common equity using;the security market line (SML).;c. Calculate the after-tax weighted average cost of capital (WACC).;9. The following are balance sheets for the Genatron Manufacturing;Corporation for the years 2013 and 2014;BALANCE SHEET 2013 2014;Cash $50,000 $40,000;Accounts receivable 200,000 260,000;Inventory 450,000 500,000;Total current assets 700,000 800,000;Fixed assets (net) 300,000 400,000;Total assets $1,000,000 $1,200,000;Bank loan, 10% $90,000 $ 90,000;Accounts payable 130,000 170,000;Accruals 50,000 70,000;Total current liabilities $270,000 $330,000;Long-term debt, 12% 300,000 400,000;Common stock, $10 par 300,000 300,000;Capital surplus 50,000 50,000;Retained earnings 80,000 120,000;Total liabilities and equity $1,000,000 $1,200,000


Paper#30835 | Written in 18-Jul-2015

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