Question;Problem 1;Suppose a;company is considering two investment projects. Both projects require an;upfront expenditure of $30 million. The company estimates that the cost of;capital is 10% and that the investments will result in the following after-tax;cash flows (in millions of dollars). Complete parts (a) through (e) below.;Year;Project A;Project B;1;$28;$10;2;$20;$15;3;$10;$20;4;$5;$25;a) Find the regular payback;period for each project.;b) Find the discounted;payback period for each project.;c) Assume that the two;projects are independent and the cost of capital is 10%. Which project or;projects should the company undertake? Base your results on the NPV and show;the NPVs.;d) Assume that the two;projects are mutually exclusive and the cost of capital is 5%. Which project or;projects should the company undertake? Base your results on the MIRR and show;the MIRRs.;e) Explain why quantitative;measures may not always be the best way to evaluate a project.;Problem 2;A shellfish processing company is;thinking about purchasing a new clam digger for $14,000. The expected net cash;flows resulting from the digger are $9,000 in year 1, $7,000 in the 2nd year;$5,000 in the 3rd year, and $3,000 in the 4th year. Should the company purchase;this digger if its cost of capital is 12 percent? In providing your answer, you must present;the NPV along with your decision to accept/reject.;Problem 3;What is the;internal rate of return for a project that has a net investment of $60,000 and;the following net cash flows: Year 1 = $15,000, Year 2 = $20,000, Year 3 =;$25,000, Year 4 = $30,000 (You may find Excel or a financial calculator useful;to solve this problem)?
Paper#45074 | Written in 18-Jul-2015Price : $19