Discount rate-calculate the net present value-payback

Assignment Help Financial Management
Reference no: EM13977771

Using a 4.5% discount rate, calculate the Net Present Value, Payback, Profitability Index, and IRR for each of the investment projects below (note, the inflows are for each year). Based on your calculations rank the projects and support you answer. Project 1 Initial Invest= $490,000, Cash inflows of $100,000 for years 1-5 and $50,000 for years 6-10. Project 2 Initial Invest= $970,000, Cash inflows of $400,000 for years 1-3, $0 for years 4-7 and $250,000 for years 8-10. Project 3 Initial Invest= $820,000, Cash inflows of $300,000 for years 1-5, $0 for years 6-9 and $100,000 for year 10. (Part 2) Assuming a budget of $1,100,000 what are your recommendations for the three projects in the above problem. Explain. Assuming a budget of $2,200,000 what are your recommendations for the above problem? Explain.

Reference no: EM13977771

Questions Cloud

What is balance of current assets on firms balance sheet : Balance Sheet The assets of Dallas & Associates consist entirely of current assets and net plant and equipment. The firm has total assets of $2.4 million and net plant and equipment equals $1.9 million. What is the company's total debt? What is the a..
Interest rates moved since alexander issued the bond : "Your company Alexander has a bond retiring in 2020. This bond has an interest rate of 13.5%, a face value of $10,300,000 and a closing price of $103.53. Since your company had sold these 10 year bonds at $100 in 2015, which way have interest rates m..
Management with regard to financing current operating assets : Explain the three alternative current operating assets financing policies in details. In your opinion, what is the best strategy for management with regard to financing current operating assets? Does the answer vary by industry? Does the answer vary ..
Reflect on the importance of time value of money : Reflect on the importance of time value of money in corporate finance. Also, express your thoughts on how time value of money affects the valuation of a company.
Discount rate-calculate the net present value-payback : Using a 4.5% discount rate, calculate the Net Present Value, Payback, Profitability Index, and IRR for each of the investment projects below (note, the inflows are for each year). Based on your calculations rank the projects and support you answer. A..
Alternative current operating assets financing policies : Explain the three alternative current operating assets financing policies in details. In your opinion, what is the best strategy for management with regard to financing current operating assets? Does the answer vary by industry? Does the answer vary ..
Manufactures and sells climate-controlled wine cabinets : Hope Corporation manufactures and sells climate-controlled wine cabinets. Its most popular model sells for $3,000 and comes with a basic 90-day warranty. For an extra $150, this warranty is extended to 3 years, and for $300 the warranty is extended f..
What is the firms depreciation and amortization expense : The Centennial Chemical Corp. announced that, for the period ending March 31, 2014, it had earned income after taxes worth $5,330,275 on revenues of $13,144,680. The company’s costs (excluding depreciation and amortization) amounted to 61 percent of ..
The concept of accounts payable : The concept of accounts payable is applicable only when a customer buys from a retailer. Amazon does not allow third-party sellers to sell products through its website. It is not uncommon for a big retailer like Amazon to be able to hold products for..

Reviews

Write a Review

Financial Management Questions & Answers

  What share price is there a margin call

A trader buys 200 shares of a stock on margin. The price of the stock is $20. The initial margin is 60% and the maintenance margin is 30%. How much money does the trader have to provide initially? For what share price is there a margin call?

  In addition to the tax shield offered by governments

In addition to the tax shield offered by governments around the world, debt has a lower required rate of return than equity - explain why this is so? Given the inherent tax shield advantages why might we still come across 100% Equity financed firms?

  Targeted capital structure-marginal tax rate

Brady Inc. has a targeted capital structure of 40% debt, 10% preferred stock, and 50% common stock. The marginal tax rate is 35%. Use the data below to calculate the companys WACC. Ignore flotation costs.

  Wal-mart cost of capitalwal-mart with 50 billion in sales

wal-mart cost of capitalwal-mart with 50 billion in sales in 2010 is the worlds largest retailer. it operates nearly

  Implications of deviations from purchasing power parity

What are the implications of deviations from purchasing power parity for countries’ competitive positions in the world markets?

  Complete the assets of the pro forma balance sheet

Provincial imports has assembled 2015 financial statement income and balance sheet and financial projections for use in preparing financial plans for the coming year 2016. Prepare a pro forma for year ended December 31 2016 using fixed cost data to i..

  Representativeness bias-hindsight bias-confirmation bias

People willing to investment $10,000 to save 100 people but only an additional $10,000 to save 1,000,000 additional people is an example of ________. a) Representativeness bias b) hindsight bias c) confirmation bias d) scope neglect bias e) overconfi..

  What are the incremental net cash flows that will occur

The Erley Equipment Company purchased a machine 5 years ago at a cost of $80,000. The machine had an expected life of 10 years at the time of purchase, and it is being depreciated by the straight-line method by $8,000 per year. If the new machine is ..

  Real dollars and the average inflation rate is expected

Frank wants to have $2,000,000 in his retirement account when he retires 30 years from now. If he expects a return of 8%, how much does he need to invest monthly?  Same as (1), but now Frank wants to have $2,000,000 in real dollars and the average in..

  Considering four mutually exclusive public-works projects

Tempe is considering four mutually exclusive public-works projects. Their costs and benefits are presented in the table below. Each project has a useful life of 50 years and the MARR is 12% per year. Which of the projects, if any, should be selected?..

  Describe the workings of any home buyer assistance schemes

Identify and describe the key factors that must be taken into consideration when assessing whether a credit facility is ‘not unsuitable' for a borrower.

  What rate of simple interest was her deposit earning

Petra has forgotten the rate of simple interest she earned on a 120-day term deposit at Scotiabank. At the end of the 120 days, she received interest of $327.85 on her $20,000 deposit. What rate of simple interest was her deposit earning?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd