Use a Sensitivity Analysis to Adjust Cash Flows in NPVRefer to the data provided below for Proposal A and also provided in an Excel file in this link toanswer the following questions.ProposalAInitial investment$100,000Cash flow from operationsYear 160,000Year 240,000Year 335,000DisinvestmentLife (years)312%Discount rate (for all proposals)a. Prepare a table in Excel to compute the net present value for Proposal A and consider this thelikely scenario. Next, prepare an optimistic and pessimistic scenario. For the optimistic scenario,increase each cash inflow by 10% and for the pessimistic scenario, decrease each net cash inflowby 10%.

Use a Sensitivity Analysis to Adjust Cash Flows in NPVRefer to the data provided below for Proposal…

Answered: Use a Sensitivity Analysis to Adjust…

Financial And Managerial Accounting

15th Edition

ISBN:9781337902663

Author:WARREN, Carl S.

Publisher:WARREN, Carl S.

Chapter26: Capital Investment Analysis

Section: Chapter Questions

Problem 1CMA: Foster Manufacturing is analyzing a capital investment project that is forecasted to produce the...

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A project has the following cash flows set out below. What is the profitability index of this project if the relevant discount rate is 2 percent? Enter your final answer to two decimal places. Year Cash flow 0 -1,745 1 537 2 2,066 3 3,912
Consider the following project cash flow. YEAR CASH FLOW 0 -1000 1 500 2 500 3 500 4 500 5 500 Use this information to calculate the Internal Rate of Return by linear interpolation(the trial and error method). WITH WORKING PLEASE
You are given the following information about the cash flows for Projects A and B: Project B $12,643.00 $6,264.00 $5.119.00 $4,284.00 $3,265.00 $2,884.00 Year 0 1 2 3 4 5 Given this information, and assuming a risk-adjusted discount rate of 14.0 percent for both projects, determine the internal rate of return (IRR) for the project with the highest net present value (NPV). 26.0818% 25.6301% 25.1784% Project A -$10,356.00 $2,185.00 $4,294.00 $4,642.00 $6,360.00 $3,125.00 O24.2750%
You are given the following decision tree representing the cash flows for a project (conditional probabilities are in parentheses). Assuming that the correct risk-adjusted discount rate (WACC) to use is 14 percent, determine the internal rate of return for this project. Year 0 Year 1 Year 2 Year 3 $300 (5) $500 (5) $500 (5) $700 (5) $900 44.63% 43.53% 42.43% 46.83% 45.73% $500 (5) $700 (5) $400 (5) $600 (.5) $600 (.5) $800 (5) $500 (5) $700 (5) $700 (5) $900 (5)
Information on four investment proposals is given below: Investment required. Present value of cash inflows Net present value Life of the project Answer is complete but not entirely correct. Profitability Index Investment Proposal ABCO A В Required: 1. Compute the profitability index for each investment proposal. (Round your answers to 2 decimal places.) 2. Rank the proposals in terms of preference. с D 3 0.41 0.38 0.50 0.33 Rank Preference A $ (240,000) 337,300 $ 97,300 Second Third First Fourth ✓ ✔ 5 years Investment Proposal $ (73,500) 110,250 $36,750 B $ (105,000) 144,900 $ 39,900 7 years 6 years $ (126,000). 168,000 $ 42,000 6 years
Based on the following, obtain the Incremental Cash Flow and determine the NPV (12% discount) for the project: \begin{tabular}{|l|r|r|r|r|r|r|} \hline & \multicolumn{6}{|c|}{ Year } \\ \hline & & 1 & 2 & 3 & 4 & 5 \\ \hline Investment i Show Transcribed Text $403.93 $280.28 $356.63 $179.41
Information on four investment proposals is given below: Investment required. Present value of cash inflows Net present value Life of the project Investment Proposal Required: 1. Compute the profitability index for each investment proposal. Note: Round your answers to 2 decimal places. 2. Rank the proposals in terms of preference. A B C D Profitability Index A $ (150,000) 211,500 $ 61,500 Rank Preference 5 years Investment Proposal B $ (200,000) 275,600 $ 75,600 7 years с $ (180,000) 274,100 $ 94,100 6 years D $ (2,600,000) 3,470,500 $ 870,500 6 years
A project is being analyzed with the following set of cash flows. Calculate the internal rate of return (IRR). (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Cash Year Flow 0 16,000 123 6,700 8,000 6,500 IRR %
Calculate/estimate the IRR(s) for a 6-year project with the following cash flows: CF0 = -50, CF1 =28 = CF2 = CF3 = CF4 = CF5, and CF6 = -93. In Excel, plot the NPV (= Y axis) against r (= discountrate), using r = 0%, 2%, and so on until you find all IRRs in the chart. Identify/estimate all IRRs.
Payback period. Given the cash flow of two projects-A and B-in the following table, and using the payback period decision model, which project(s) do you accept and which proje period for recapturing the initial cash outflow? For payback period calp What is the payback period for project A? 6 Data Table - X years (Round to one decimal place.) (Click on the following icon D in order to copy its contents into a spreadsheet.) Cash Flow B. Cost Cash flow year 1 Cash flow year 2 Cash flow year 3 Cash flow year 4 Cash flow year 5 Cash flow $12,000 $6,000 $6,000 $6,000 $100,000 $20,000 $10,000 $40,000 $6,000 $30,000 SO $6,000 $6,000 year 6. SO Print Done
Information on four investment proposals is given below: Investment required Present value of cash inflows Net present value Life of the project Required: 1. Compute the profitability index for each investment proposal. Note: Round your answers to 2 decimal places. 2. Rank the proposals in terms of preference. Investment Profitability Proposal Index A B с D $ (150,000) 211,500 $ 61,500 Rank Preference 5 years Investment Proposal 6 $ (200,000) 275,600 $ 75,600 7 years $ (180,000) 274,100 $ 94,100 6 years D $ (2,600,000) 3,470,500 $ 870,500 6 years
Given the following information, calculate the Internal Rate of Return (IRR) for the following cash flow. Hint: use linear interpolation method for discount rates 2% and 12%. Project costs and benefits Cash Outflow Year 0 Cash Inflow Year 1 Cash Inflow Year 2 Cash Inflow Year 3 Project -$2580 $977 $930 $955

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