What is the internal rate of return for the project

Assignment Help Accounting Basics

Reference no: EM132181526

Question: Capital Budgeting

Show all inputs, outputs and additional calculations for full credit.

1. Refer to Table 1 above. Assume the weighted average cost of capital = 10%.

A) What is the Net Present Value for this Project?__________

Would you accept or reject the project?_______________

Explain why or why not.

B) What is the Internal Rate of Return for this Project?

Would you accept or reject the project?_______________

Explain why or why not.

C) Which method is better for this project?______

Explain your answer.

2. Assume Keurig Inc is evaluating whether or not to purchase a piece of equipment that will involve an initial outlay or cost of $1 million. Assume a production of a new product line will begin 6 months following installation and will yield the following estimated Operating Cash Flows per year for the following years listed in Table 2 below:

Assume the wacc=12%

A) What is the Internal Rate of Return (IRR)? ___________

B) Would you accept or reject the project?______________

C) Explain why or why not______

3. Refer to Table 3below.

A) Given Table 3, what is the Payback Period?__________

B) Assume you want your money back within 3.75 years. Would you accept or reject the project?_______________

4. Refer to Table 4below.

A) Assume the wacc =5%. What is the Discounted Payback Period?

B) Assume you want your money back within 5.5 years. Would you accept or reject the project?_______________

C) Explain why or why not.________

5. Given the following Cash flows for Project A and Project B respectively, calculate the Modified Internal Rate of Return (MIRR) for Project A and the MIRR for Project B. Assume the company has a wacc=8%.

A) If these projects are independent, which project(s) would you accept? Explain your answer.

B) If these projects are mutually exclusive, which project(s) would you accept? Explain your answer.

C) If Project B is a riskier project than Project B, would you use the same wacc to evaluate both Project A and Project B? ________
Explain your answer.

6. Given the five methods presented in Capital budgeting, which method is the best for evaluating a projects contribution to firm value. In a paragraph explain your answer. Include the advantages and disadvantages of the method you chose.

*Note: Please see attached file for the tables of each question.

Information related to above question is enclosed below:

Attachment:- ProblemSet.rar

Reference no: EM132181526

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