Bussiness finance problem solving | Business & Finance homework help

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1-Big Steve’s makers of swizzle sticks are considering the purchase of a new plastic stamping machine. The investment requires an initial outlay of $90,000 and will generate net cash inflows of $19,000 per year for 8 years.

 

 

 

A-What is the project’s NPV using a discount rate of 9 percent? Should the project be accepted? Why or why not?

 

 

 

B-What is the project’s NPV using a discount rate of 13 percent? Should the project be accepted? Why or why not?

 

 

 

C-What is this project internal rate of return? Should the project be accepted? Why or why not?

 

 

 

A-If the discount rate is 9 percent then the project NPV is? Round to the nearest dollar. 

 

 

 

 

 

2-What is the internal rate of return for the following project? An initial outlay of $9,000 resulting in a single cash flow of $13,533 in 7 years.

 

 

 

A-The internal rate of return for the project is? %. Round to the nearest whole percent.

 

 

 

3-East Coast Television is considering a project with an initial outlay of $x. You will have to determine the amount. It is expected that the project will produce a positive cash flow of $57,000 a year at the end of each year for the next 16 years. The appropriate discount rate for this project is 11 percent. If the project has an internal rate of return of 16 percent, what is the project’s net present value?

 

 

 

A-If the project has an internal rate of return of 16% then the projects initial outlay is $? Round to the nearest cent.

 

 

 

4-The cash flows for three independent projects are found below

 

 

 

Initial Investment      Project A        Project B        Project C

 

 

 

Year – 0                      ($55,000)        ($110,000)      ($420,000)

 

Year – 1                      $13,000           $28,000           $210,000        

 

Year – 2                      $18,000           $28,000           $210,000

 

Year –             3                      $23,000           $28,000           $210,000

 

Year – 4                      $28,000           $28,000           ________

 

Year – 5                      $32,000           $28,000           _________

 

 

 

A-Calculate the IRR for each of the projects.

 

 

 

B-If the discount rate for all three projects is 17 percent, which project or projects would you want to undertake?

 

 

 

C-What is the net present value of each of the projects where the appropriate discount rate is 17 percent.

 

 

 

The IRR of project a is % round to two decimal places.

 

 

 

5-Microwave oven programming, Inc. is considering the construction of a new plant. The plant will have an initial cash outlay of $7.3 million (=-7.3million) and will produce cash flows of $2.6 million at the end of the year 1, $4.4 million at the end of year 2, and $1.6 million at the end of year 3 through 5.

 

 

 

What is the internal rate of return on this new plant? The IRR of the project is? %, round to two decimal places.

 

 

 

6-Fijisawa, Inc. is considering a major expansion of its product line and has estimated the following cash flows associated with such an expansion. The initial outlay would be $1,950,000 and the project would generate cash flows of $540,000 per year for six years.

 

 

 

The appropriate discount rate is 15.7 percent

 

 

 

A-Calculate the net present value

 

 

 

B-Calculate the profitability index

 

 

 

C-Calculate the internal rate of return

 

 

 

D-Should this project be accepted? Why or why not?

 

 

 

The NPV of the expansion is? Round to the nearest dollar.

 

 

 

7-You are considering a project with an initial cash outlay of $87,000 and expected cash flows of $26,970 at the end of each year for six years. The discount rate for this project is 9.6 percent.

 

 

 

A-What are the projects payback and discounted payback periods.

 

 

 

B-What is the projects NPV?

 

 

 

C-What is the projects PI?

 

 

 

D-What is the projects IRR?

 

 

 

The payback period of the project is? Years, round to two decimal places.

 

 

 

8-Assume that a new project will annually generate revenues of $1,800,000 and cash expenses including both fixed and variable cost of $700,000, while increasing depreciation by $140,000 per year. In addition, the firms tax rate is 36 percent calculate the operating cash flows for the new project. The firm’s operating cash flows are$?, round to the nearest dollar.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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