Finance Homework NPV Calculations Exercise Help

Anonymous
timer Asked: Feb 20th, 2019
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Question Description

Finance Homework

Please show work & provide clear explanation as to how to get the answers. See attachment for all questions.

Q1 Cullumber Corp. management is planning to spend $650,000 on a new marketing campaign. They believe that this action will result in additional cash flows of $304,000 each year for three years. If the discount rate is 17.5 percent, what is the NPV on this project? (Enter negative amounts using negative sign e.g. -45.25. Do not round discount factors. Round other intermediate calculations and final answer to 0 decimal places, e.g. 1,525.) Q2 Sheridan, Inc. management is considering purchasing a new machine at a cost of $3,810,000. They expect this equipment to produce cash flows of $853,690, $939,950, $866,730, $1,069,400, $1,282,560, and $1,222,400 over the next six years. If the appropriate discount rate is 15 percent, what is the NPV of this investment? (Enter negative amounts using negative sign e.g. -45.25. Do not round discount factors. Round other intermediate calculations and final answer to 0 decimal places, e.g. 1,525.) Q3 Oriole Incorporated management is considering investing in two alternative production systems. The systems are mutually exclusive, and the cost of the new equipment and the resulting cash flows are shown in the accompanying table. The firm uses a 8 percent discount rate for production system projects. Year System 1 System 2 0 -$12,800 -$42,700 1 12,800 33,100 2 12,800 33,100 3 12,800 33,100 Calculate NPV. (Enter negative amounts using negative sign, e.g. -45.25. Do not round discount factors. Round answers to 2 decimal places, e.g. 15.25.) NPV of System 1 is $ and NPV of System 2 is $ Q4 Blossom Corp. management is expecting a project to generate after-tax income of $66,190 in each of the next three years. The average book value of the project’s equipment over that period will be $212,570. If the firm’s investment decision on any project is based on an ARR of 37.5 percent. (Round answer to 1 decimal place, e.g. 5.2%.) What is the project’s accounting rate of return? Accounting rate of return is % Should the firm accept this project? Q5 Cullumber, Inc., a resort management company, is refurbishing one of its hotels at a cost of $7,117,580. Management expects that this will lead to additional cash flows of $1,640,000 for the next six years. What is the IRR of this project? If the appropriate cost of capital is 12 percent, should Cullumber go ahead with this project? (Round answer to 2 decimal places, e.g. 5.25%.) Q6 Blossom Communication Corp. is investing $7,023,700 in new technologies. The company’s management expects significant benefits in the first three years after installation (as can be seen by the following cash flows), and smaller constant benefits in each of the next four years. Find excel attachment to solve this problem Year Cash Flows 1 2 3 4-7 $1,699,000 $3,419,000 $2,534,100 $937,500 Q7 What is the discounted payback period for the project assuming a discount rate of 10 percent? (Round answer to 2 decimal places, e.g. 15.25. If discounted payback period exceeds life of the project, enter 0 for the answer.) The discounted payback period for the project is years. Q8 Management of Pharoah Home Furnishings is considering acquiring a new machine that can create customized window treatments. The equipment will cost $241,550 and will generate cash flows of $67,750 over each of the next six years. If the cost of capital is 10 percent, what is the MIRR on this project? (Round intermediate calculations to 3 decimals and final answers to 1 decimal places, e.g. 15.5%. Do not round factor values.) Q9 Management of Blossom, Inc., an aviation firm, is considering purchasing three aircraft for a total cost of $165,701,963. The company would lease the aircraft to an airline. Cash flows from the proposed leases are shown in the following table. Years Cash Flow 1–4 $29,075,000 5–7 61,120,000 8–10 76,350,000 Q10 What is the IRR of this project? (Round answer to 2 decimal places, e.g. 15.25%.) Sheridan Specialties just purchased inventory-management computer software at a cost of $2,015,950. Cost savings from the investment over the next six years will produce the following cash flow stream: $201,340, $354,240, $336,600, $552,250, $793,320, and $598,740. What is the payback period on this investment? (Round answer to 2 decimal places,e.g. 15.25.) Q: A construction firm is evaluating two value-adding projects. The first project deals with building access roads to a new terminal at the local airport. The second project is to build a parking garage on a piece of land that the firm owns adjacent to the airport. The firm's decision will be to pick neither project. pick the one that adds the most value because they are mutually exclusive projects. accept both projects because they are independent projects. accept both projects because they are contingent projects.

Tutor Answer

FrankRose23
School: UC Berkeley

Here is the solution. Let me know if they all check out. Question 6/7 are the same

Question 1
NPV of the project

− 650000 +

304000
(1 + 0.175)1

+

304000
(1 + 0.175) 2

+

304000
(1 + 0.175) 3

= $16,309.39

NPV = 16,309.39

Question 2
NPV of the project

− 3810000 +

853690
939950
866730
1069400
1282560
1222400
+
+
+
+
+
= −$9465.42
1
2
3
4
5
(1 + 0.15)
(1 + 0.15)
(1 + 0.15)
(1 + 0.15) 6
(1+ 0.15) (1 + 0.15)

NPV = 9,465.42

Question 3
NPV of System 1

− 12800 +

12800
(1 + 0.08)1

+

12800...

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Review

Anonymous
awesome work thanks

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