Project #66569 - 10 Finance Problems

1-  NPV with Normal Cash Flows Compute the NPV for Project M and accept or reject the

project with the cash flows shown below if the appropriate cost of capital is 8 percent.  (LG13-3)

Project M

Time:     0              1              2              3              4              5

Cash flow            - \$1,000                \$350       \$480       \$520       \$600       \$100

2-  NPV with Non-Normal Cash Flows Compute the NPV statistic for Project K and rec-

ommend whether the firm should accept or reject the project with the cash flows shown

below if the appropriate cost of capital is 6 percent.  (LG13-3)

3-  Payback Compute the payback statistic for Project B and decide whether the firm should

accept or reject the project with the cash flows shown below if the appropriate cost of capi-

tal is 12 percent and the maximum allowable payback is three years.  (LG13-2)

Project B

Time:     0              1              2              3              4              5

Cash flow            - \$11,000             \$3,350   \$4,180   \$1,520   \$0           \$1,000

4-  Discounted Payback Compute the discounted payback statistic for Project C and rec-

ommend whether the firm should accept or reject the project with the cash flows shown

below if the appropriate cost of capital is 8 percent and the maximum allowable discounted

payback is three years.  (LG13-2)

Project C

Time:     0              1              2              3              4              5

Cash flow            - \$1,000                \$480       \$480       \$520       \$300       \$100

5-  PI Compute the PI statistic for Project Z and advise the firm whether to accept or reject

the project with the cash flows shown below if the appropriate cost of capital is 8 percent.

(LG13-6)

Project Z

Time:     0              1              2              3              4              5

Cash flow            - \$1,000                \$350       \$480       \$650       \$300       \$100

________

Use this information to answer the next six questions. If a particular decision method should

not be used, indicate why.

Suppose your firm is considering investing in a project with the cash flows shown below, that the

required rate of return on projects of this risk class is 8 percent, and that the maximum allowable

payback and discounted payback statistics for the project are 3.5 and 4.5 years, respectively.

Time:   0              1              2              3              4              5              6

Cash flow            - \$5,000 \$1,200 \$2,400 \$1,600 \$1,600 \$1,400 \$1,200

6-Payback Use the payback decision rule to evaluate this project; should it be accepted or

rejected?  (LG13-2)

7--  IRR Use the IRR decision rule to evaluate this project; should it be accepted or rejected?

(LG13-4)

8-  NPV Use the NPV decision rule to evaluate this project; should it be accepted or rejected?

(LG13-3)

9-  PI Use the PI decision rule to evaluate this project; should it be accepted or rejected?  (LG6)

10-  PI Use the PI decision rule to evaluate this project; should it be accepted or rejected?

(LG13-6)

 Subject Mathematics Due By (Pacific Time) 04/18/2015 09:00 pm
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