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Question;12-1;Finding the NPV;A project has an initial cost of \$40,000;expected net cash inflows of \$9,000 per year for 7 years, and a cost of capital;of 11 %. What is the project?s NPV? (Hint: Begin by constructing a time line.);12-2;IRR;12-3;MIRR;Step 1: FV=?= 88049.47, PMT=-9000,N=7,I/Y=;11, PV=0 Step 2: FV=88049.47, PMT=,N=7,I/Y=;12-5;Projected Payback Period;12-6;Discounted Payback;year;project a;project B;1;\$ 5,000,000;\$20,000,000;2;\$10,000,000;\$10,000,000;3;\$20,000,000;\$6,000,000;12-7;NPV;Your division is considering two investment;projects, each of which requires an up-front expenditure of \$15 million. You;estimate that the investments will produce the following net cash flows: a.;What are the two projects? net present values, assuming the cost of capital;is 5%? 10%? 15%?;b. What are the two projects? IRRs at these;same costs of capital;12-8;NPV, IRRS, and MIRR for Independent Projects;year;truck;pulley;1;\$5,100;\$7,500;2;5,100;7,500;3;5,100;7,500;4;5,100;7,500;5;5,100;7,500;Edelman Engineering is considering;including two pieces of equipment, a truck and an overhead pulley system, in;this year?s capital budget. The projects are independent. The cash outlay for;the truck is \$17,100 and that for the pulley system is \$22,430. The firm?s cost;of capital is 14%. After-tax cash flows, including depreciation, are as;follows;0 1-5;IRR= MIRR= NPV=;Truck: -17,100;5,100;Pulley: -22,430 7,500;R=14%;12-11;MIRR & NPV;year;X;y;0;-\$5,000;-\$5,000;1;1,000;4,500;2;1,500;1,500;3;2,000;1,000;4;4,000;500;Your company is considering two mutually;exclusive projects, X and Y, whose costs and cash flows are shown below;The;projects are equally risky, and their cost of capital is 12%. You must make a;recommendation, and you must base it on the modified IRR (MIRR). Which project;has the higher MIRR?

Paper#50960 | Written in 18-Jul-2015

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