Please help me answer these 10 question. Would really help out if theres show wo
ID: 2637766 • Letter: P
Question
Please help me answer these 10 question. Would really help out if theres show work on it, so I can calculate better.. If not then still good.
Anything is helpful
Question 1
A company is considering two mutually exclusive projects. Both require an initial investment of $10,000 at t = 0. Project X has an expected life of 2 years with after-tax cash inflows of $6,000 and $7,900 at the end of Years 1 and 2, respectively. Project Y has an expected life of 4 years with after-tax cash inflows of $4,300 at the end of each of the next 4 years. Each project has a cost of capital 8%.
Use the replacement chain approach to determine the NPV of the most profitable project.
A.
4324.87
B.
3852.45
C.
5120.75
D.
4242.14
Question 2
A company is considering two mutually exclusive projects. Both require an initial investment of $10,000 at t = 0. Project X has an expected life of 2 years with after-tax cash inflows of $6,000 and $7,900 at the end of Years 1 and 2, respectively. Project Y has an expected life of 4 years with after-tax cash inflows of $4,300 at the end of each of the next 4 years. Each project has a cost of capital 8%.
Find the EAA for project X.
A.
1458.25
B.
1125.36
C.
1047.28
D.
1305.76
Question 3
A company is considering two mutually exclusive projects. Both require an initial investment of $10,000 at t = 0. Project X has an expected life of 2 years with after-tax cash inflows of $6,000 and $7,900 at the end of Years 1 and 2, respectively. Project Y has an expected life of 4 years with after-tax cash inflows of $4,300 at the end of each of the next 4 years. Each project has a cost of capital 8%.
Find the EAA for project Y.
A.
1158.36
B.
1089.65
C.
1478.24
D.
1280.79
Question 4
Suppose you have a project with the following cash flows and 10% required return.
0
-5000
1
2000
2
2500
3
-500
4
3000
5
3000
What is the NPV of this project?
A.
2836.45
B.
1687.52
C.
2420.44
D.
1847.36
Question 5
Suppose you have a project with the following cash flows and 10% required return.
0
-5000
1
2000
2
2500
3
-500
4
3000
5
3000
What is the IRR of this project?
A.
18.63%
B.
26.44%
C.
21.36%
D.
22.85%
Question 6
Suppose you have a project with the following cash flows and 10% required return.
0
-5000
1
2000
2
2500
3
-500
4
3000
5
3000
What is the PI of this project?
A.
1.48
B.
1.58
C.
1.38
D.
1.28
Question 7
Suppose you have a project with the following cash flows and 10% required return.
0
-5000
1
2000
2
2500
3
-500
4
3000
5
3000
What is the MIRR of this project?
A.
22.65%
B.
29.54%
C.
18.49%
D.
15.87%
Question 8
Suppose you have a project with the following cash flows and 10% required return.
0
-5000
1
2000
2
2500
3
-500
4
3000
5
3000
What is the payback of this project?
A.
3.33 years
B.
4 years
C.
2.53 years
D.
2.89 years
Question 9
Suppose you have a project with the following cash flows and 10% required return.
0
-5000
1
2000
2
2500
3
-500
4
3000
5
3000
What is the discounted payback of this project?
A.
3.73 years
B.
4.79 years
C.
3.33 years
D.
4.18 years
Question 10
Suppose you have the following 2 projects with the following cash flows and 10% required return.
0
-4000
-6000
1
1500
2000
2
2000
3000
3
2000
1500
4
1500
2000
5
1500
6
1500
What is the EAA of the best project?
A.
-714.36
B.
589.77
C.
486.98
D.
652.36
Top of Form
Bottom of Form
A.
4324.87
B.
3852.45
C.
5120.75
D.
4242.14
Explanation / Answer
Answer for Question 1:
Cash outflow of Project X is discouted with the discount factor at the end of 2nd year as it is invested at the start of the 3rd year. This is because replacement chain approach is used.
Project X has a better NPV than Project Y. So, Answer is option A.
Answer for Question 2:
EAA of project of Project X:
Formula for EAA = r*(npv)/1-(1+r)^-n
NPV = $2,328.53 (Calculated already for question A)
r =.08
n=2.
substituting the values in the formula EAA of project X = $1,305.77. Answer is option D.
Answer for Question 3:
EAA of project Y:
r =.08
NPV = 4242.15 (Calculated already for question A)
n= 4
Substituting the values in formula EAA of project Y = $1, 280.79.
Answer is option D.
Answer for Question 4:
$2,420.44
Answer is Option C.
Answer for Question 5:
IRR is the rate at which NPV is equal to 0. Calculating NPV using trial and error method at 26% and 27%.
NPV at 26% is:
NPV at 27%
Interpolating between 26% and 27% IRR = 26%+46.95/(46.95+58.05) =26%+.447 =26.447%
Hence answer is Option B.
Answer for Qustion 7:
Profitability index = PV of cash inflows/PV of cash out flows.
= 7796.10/5375.66 = 1.45 .
Answer is Option A. It must be a typo error as the computation here is resulting as 1.45 and nearest answer given in the options is A. Hence answer is A.
Answer for Question 7:
MIRR cannot be calculated as reinvestment rate is not provided.
Answer for Question 8:
Payback period is the time taken to recover the investment.
Accumulated cash flows till year Year 3 = $4,000
Cash flow required to meet project investment = $5,000
Cash flows received during year 4 = $3,000
Required cash flow to meet $ 5, 000 = $5, 000- $4,000 = $1,000
No of months required to generate $1000 = (12/3000)*1000 = 4 months.
Hence payback period = 3.4 years.
Answer for Question 9:
Discounted payback period for this project is 3+(12/$2049.04/)* ($5,000-$3,508.64) = 3Years + 8.73 months = 3.87 months.
Answer for Question 10:
EAA of project 1 = r*(npv)/1-(1+r)^-n= .1($5,195.65)/1-(1+.1)^6=1638.82
EAA of project 2 =.1*( 4030.37)/.4355 = 925.45
Particulars Cash outflows at the beginning of the year Project X Cash outflows at the beginning of the year Project Y Project X Project Y Present value factor @ 8% Discounted cashflows of Project X Discounted cashflows of Project Y $10,000.00 $10,000.00 1 Cash inflows: 1 $6,000.00 $4,300.00 0.9259 $5,555.56 $3,981.48 2 $7,900.00 $4,300.00 0.8573 $6,772.98 $3,686.56 3 $8,573.39 $6,000.00 $4,300.00 0.7938 $4,762.99 $3,413.48 4 $7,900.00 $4,300.00 0.7350 $5,806.74 $3,160.63 NPV $4,324.87 $4,242.15Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.