Reference no: EM132270575

Q1. Beta Enterprises, Inc. is considering a project that has the following cash flow and WACC data. What is the project's NPV? Enter your answer rounded to two decimal places. Do not enter $ or comma in the answer box. For example, if your answer is $12,300.456 then enter as 12300.46 in the answer box.

WACC: 14%

Year: 0 1 2 3

Cash flows: -$950 $500 $300 $400

Q2.Delta Enterprises, Inc. has a WACC of 10% and is considering a project that requires a cash outlay of $1,250 now with cash inflows of $500 at the end of each year for the next 5 years. What is the project's Discounted Payback?

Q3.Gamma Enterprises, Inc. is considering a project that has the following cash flow and WACC data. What is the project's MIRR?

WACC: 13%

Year: 0 1 2 3 4

Cash flows: -$1,100 $300 $320 $340 $550

Q4.Hogwarts Inc. is considering a project with the following cash flows:       

           Initial cash outlay = $2,500,000

           After-tax net operating cash flows for years 1 to 4 = $779,000 per year

           Additional after-tax terminal cash flow at the end of year 4 = $600,000

Compute the profitability index of this project if Hogwarts' WACC is 11%.

Q5.Anderson Associates is considering two mutually exclusive projects that have the following cash flows:

                       Project A                    Project B

Year                Cash Flow                   Cash Flow

0                   -$10,000                     -$8,000

1                     4,000                       7,000

2                     2,000                         3,000

3                     6,000                         1,000

4                     8,000                         3,000

At what cost of capital do the two projects have the same net present value? (That is, what is the crossover rate?)

Q6. Alpha & Omega wants to invest in a new computer system, and management has narrowed the choice to Systems A and B.

System A requires an up-front cost of $100,000, after which it generates positive after-tax cash flows of $70,000 at the end of each of the next 2 years. The system could be replaced every 2 years, and the cash inflows and outflows would remain the same.

System B also requires an up-front cost of $100,000, after which it would generate positive after-tax cash flows of $48,000 at the end of each of the next 3 years. System B can be replaced every 3 years, but each time the system is replaced, both the cash outflows and cash inflows would increase by 10%.

The company needs a computer system for 6 years, after which the current owners plan to retire and liquidate the firm. The company's cost of capital is 14%. What is the NPV (on a 6-year extended basis) of System A?