Question 23 As part of a project appraisal, a Future Value (FV) of £8900 in 2 years time, is discounted at a rate of 9% per annum. Calculate the Present Value (PV). (to 2 d.p.)
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- Required: 1a. Compute the net present value for each project. Use a rate of 10% and the present value of an annuity of $1 in the table above. If required, use the minus sign to indicate a negative net present value. If required, round to the nearest whole dollar. Wind Turbines Biofuel Equipment Present value of annual net cash flows $ Less amount to be invested Net present value 1b. Compute a present value index for each project. If required, round your answers to two decimal places. Present Value Index Wind Turbines Biofuel Equipment 2. Determine the internal rate of return for each project by (a) computing a present value factor for an annuity of $1 and (b) using the present value of an annuity of $1 in the table above. If required, round your present value factor answers to three decimal places and internal rate of return to the nearest whole percent. Wind Turbines Biofuel Equipment Present value factor for an annuity of $1 Internal rate of return % %(c) Compute the annual rate of return for each project. (Hint: Use average annual net income in your computation.) (Round answers to 2 decimal places, e.g. 10.50%.) Annual rate of return Project Bono % Project Edge % Project Clayton %*** By using the following table format, calculate: (a) Calculate the, the Payback Period, and the net Present Value of for each project. Calculation of Payback Period for each project: CUMULATIVE CASH FLOWS Project A Project B Project C £ £ £ Year 1 Year 2 Year 3 Year 4 Year 5 Payback Period (years and months) Calculation of Net Present Value for each project: Discount Factors Project A Project B Project C CF DCF CF DCF CF DCF £ £ £ £ £ £ Year 1 Year 2 Year 3 Year 4 Year 5 Total DCF Initial investment Net present value b) For each of the above methods of project appraisal recommend which project should be taken up. c) Using all the information gathered from the above techniques which…
- The table below lists four mutually exclusive projects, Which project should be selected based on the equivalent annual net cost? Assume a 10% discount rate? Project A Project B Project C Project D Total Operating Cost (PV) Project D Project C Project A Project B Project life (years) 44000 37500 36000 32000 978 6 51. Determine the B/C ratio for the following project. First Cost P100, 000 Project life, years 5 Salvage value P10, 000 Annual benefits P60, 000 Annual O and M P22, 000 Interest rate, % 15 Ans: B/C = 1.16Note: Where applicable, use the present value tables provided in APPENDICES 1 and 2 that appear after QUESTION 5. REQUIRED Use the information given below to calculate the following: 5.1 Payback Period of both projects (expressed in years, months and days) 5.2 Net Present Value of both projects 5.3 Accounting Rate of Return (on average investment) of Project Ron (expressed to two decimal places) Internal Rate of Return (IRR) of Project Hob. Your answer must include the calculation of two net present values as well as the determination of the IRR expressed to two decimal places. INFORMATION 5.4 Trendy Manufacturers is investigating the possibility of investing in one of two projects. The net cash flows for the two competing investment opportunities are as follows: Year 1 2 3 4 5 Project Ron R560 000 R500 000 R400 000 R200 000 R50 000 Project Hob R340 000 R340 000 R340 000 R340 000 R340 000 Each project requires an initial investment of R1 200 000. A scrap value of R50 000 (not included…
- Compute the (a) net present value, (b) internal rate of return (IRR), (c) modified internal rate of return (MIRR), and (d) discounted payback period (DPB) for each of the following projects. The firm’s required rate of return is 13 percent. Year Project AB Project LM Project UV 0 $(90,000) $(100,000) $ (96,500) 1 39,000 0 (55,000) 2 39,000 0 100,000 3 39,000 147,500 100,000 Which project(s) should be purchased if they are independent? Which project(s) should be purchased if they are mutually exclusive?A project has annual cash flows of €-45,000, €35,700, €15,700 and €5,700. Required: What is the payback period for this project? (Round your answer to 2 decimal places (e.g.. 32.16).) Payback period yearsA project is offered which requires an outlay of £6000. Returns at the end of years 1 to 5 inclusive are respectively expected to be £1000, £2000, £2000, £2000 and £500. Compute the net present value of this project if interest is estimated to be (i) 8% per annum compounded annually and (ii) 9% per annum compounded annually
- If a project requires a $1000 initial investment, it returns $500 at the end of the first year, $600 at the end of the second year, $700 at the end of the third year, and -$500 in the fourth year. Calculate MIRR for this project if the discount rate is 9% O 10.45% O 14.77% 15.96% O 11.99%The following information regarding an investment project is available. Initial investment is £125,000 Scrap Value £10,000 at the end of 5 years Year Inflow 1 £60,000 2 £50,000 3 £10,000 4 £10,000 5 £50,000 A). What is the ARR using the Average Investment formula? Choose one from the following: A. 15% B. 17% C. 19% D. 21%Which shows the discounted payback period at an interest rate of 15% for each project for each project? TABLE P≤ 6 Project's Cash Flow ($) n B C D 0 -$3,800 -$5,200 -$3,800 -$2,800 1 0 $2,200 -$1,600 -$800 2 0 $3,800 $6,700 -$,600 3 0 $4,400 $6,800 $9,400 4 $12,500 $3,600 $6,900 $8,800 O 3.40, 1.99, 3.92, 3.25 O 3.70, 2.05, 3.92, 3.25 O 3.40, 1.67, 3.18, 2.60 O 3.70, 1.99, 3.66, 3.25 13