Quorex is evaluating two mutually exclusive projects. Project A has a net investment of $50,000 and net cash flows over a six-year period of $13,000 per year (NOTE: that project requires a reinvestment with the same cost and cash flow for another six years). Project B has a net investment of $48,500, but its net cash flows of $8,740 per year will occur over a 12-year period. If Quorex has a cost of capital of 14% for these projects, which project, if either, should be chosen, and what is its NPV?
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Quorex is evaluating two mutually exclusive projects. Project A has a net investment of $50,000 and net cash flows over a six-year period of $13,000 per year (NOTE: that project requires a reinvestment with the same cost and cash flow for another six years). Project B has a net investment of $48,500, but its net cash flows of $8,740 per year will occur over a 12-year period. If Quorex has a cost of capital of 14% for these projects, which project, if either, should be chosen, and what is its NPV?
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- Haya International are considering a project that is susceptible to risk. An initial investment of OMR90,000 will be followed by four years each with the following ‘most likely’ cash flows (there is no inflation or tax): OMR OMR Annual Sales 400,000 (volume of 100,000 units multiplied by estimated sales price of OMR 4) Annual Costs Labour 200,000 Materials 40,000 Other 10,000 250,000 (250,000) 150,000 The initial investment consists of OMR80,000 in machines, which have a zero scrap value at the end of the four-year life of the project and OMR10,000 in additional working capital which is recoverable at the end. The discount rate is 10 per cent. Required : Calculate the NPV and show the sensitivity of NPV to changes in the following: Increase in sales price by 10%; Decrease in discount rate by 10%Kiley Electronics is considering a project that has the following cash flow data. What is the project's IRR, and should the firm accept the project based on IRR if its WACC is 13.00%? Year 0 1 2 3 Cash flows -$1,100 $450 $470 $490 13.31%; Accept 13.31%; Reject -14.64%; Reject 11.98%; Accept 11.98%; RejectA 4-year financial project has net cash flows of $20,000; $25,000; $30,000; and $50,000 in the next 4 years. It will cost $75,000 to implement the project. If the required rate of return is 0.2, conduct a discounted cash flow calculation to determine the NPV.
- Consider a project with an initial investment of $60,000, a 6 year useful life (and study period), and a $10,000 salvage value. You expect an annual net revenue of $15,000 (before tax), a MARR before tax of 15.3%, and an effective tax rate of 35%. The capital equipment is to be depreciated using MACRS GDS and a 3 year class life. A)For the cash flow , compute after-tax MARR and evaluate the cash flow using an equivalent worth method. B) Develop the after-tax cash flows for the project of using a 4 year class life and MACRS ADS. Draw the after-tax cash flow diagram.Stinnett Transmissions, Incorporated, has the following estimates for its new gear assembly project: Price $1,220 per unit; variable costs = $3.75 million; quantity = 90,000 units. Suppose the company believes all of its estimates are accurate only to within ±15 percent. What values should the company use for the four variables given here when it performs its best-case scenario analysis? What about the worst-case scenario? Pls don't copy answer i give up voteManager Cafe "Blue Sky" is considering investing 2 (two) projects. Project X is an investment of $ 75,000 to replace a working but outdated cooling equipment. Project Y is a $ 150,000 investment to expand the dining facilities. Relevant cash flow data for the two projects over the expected 2 years are as follows: Project X Year 1 Year 2 Probability Cash Flow Probability Cash Flow 0.16 $0 0.08 $0 0.66 $50000 0.82 $50000 0.18 $100000 0.10 $100000 Project Y Year 1 Year 2 Probability Cash Flow Probability Cash Flow 0.50 $0 0.13 $0 0.50 $200000 0.74 $100000 0.13 $200000 Calculate: Expected value, standard deviation, and coefficient of variation for cash flows from each project. Compute: Risk-adjusted NPV for each project using a cost of capital of 15% for riskier projects, and 12% cost of capital for less risky projects. Which project is more…
- Use the following payoff table to complete parts (a) through (j). The probability of event 1 is 0.30, the probability of event 2 is 0.50, and the probability of event 3 is 0.20. EOL(A) = $ EOL(B) = $ EOL(C) = $ (Simplify your answers.) ACTION EVENT Buy 100, A ($) Buy 200, B ($) Buy 500, C ($) - 300 500 500 300 1,000 400 500 1,000 2,500 Demand 100, 1 Demand 200, 2 Demand 500, 3 e. Explain the meaning of the expected value of perfect information (EVPI) in this problem. Choose the correct answer below. A. The EVPI value provides a guideline for an upper bound on how much to consider paying for better information. O B. The EVPI is the expected payoff that the company will receive with perfect information. C. The EVPI is the value that the company should expect to pay for perfect information. O D. The EVPI value provides a guideline for a lower bound on how much to consider paying for better information.7. Your company is considering the introduction of a new product line. The initial investment required for this project is $500,000, and annual maintenance costs are anticipated to be $35,000. Annual operating cost will be in direct proportion to the level of production at $8.50 per unit, and each unit of product can be sold for $50.00. If the project has a life of 7 years, what is the minimum annual production level for which this project is economically viable? Work this problem on an after-tax basis. Assume 5-year SL depreciation (SV5=0), MV7 = 0, an effective income tax rate of 40%, and an after-tax MARR of 10% per year.Suppose your organization is deciding which of THREE projects to bid on. The information or each is in the Table 2 below. Assume that all up-front investments are not recovered, so the are shown as negative profits. Table 2: Three Projects Details Estimated Probability (P) Profits/Losses Project A 50% RM120,000 50% (RM50,000) Project B 30% RM100,000 40% RM50,000 30% (RM60,000) Project C 70% RM20,000 30% (RM5,000) Tasks: (a) Calculate the Expected Monetary Value (EMV) for each project. Then, insert all the detail: into the table. (b) Based on your result, explain on which projects you would bid. Be sure to use the EMV information and your personal risk tolerance to justify your answer.
- Randall Systems in considering four projects A, B, C and D that have risks associated with the producing benefits. Based on the information given in the table below, which project is more desirable for the company? Project A Project B Project C Project D EUAW Prob. EUAW Prob. EUAW Prob. EUAW Prob. $2,000 0.2 $3,000 0.1 -$5,000 0.2 $4,000 0.4 $1,500 0.5 -$2,500 0.4 $6,500 0.5 $2,500 0.3 $3,000 0.3 $3,500 0.5 $1,000 0.3 -$2,000 0.34. Using a discounted rate of 12 percent, INITIAL COST NET CASH FLOW YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 PROJECT A (BROILER) K100,000 (20,000) 10,000 40.000 40.000 150.000 PROJECT B (LAYERS) K100,000 33,000 33,000 33,000 33,000 33,000 a. Determine the net present value of project A and B b. Calculate the IRR on mutually exclusive investment of project A and B. C. Which project must the farm undertake and why?Rare Agri-Products Ltd. is considering a new project with a projected life of seven (7) years. The project falls under the government’s subsidy program for encouraging local agricultural products and is eligible for a one-time rebate of 25% on any initial equipment installed for the project. The initial equipment (IE) will cost $41,000,000. An additional equipment (AE) costing $3,500,000 will be needed at the end of year 3. At the end of seven (7) years, the original equipment, IE, will have no resale value but the supplementary equipment, AE, can be sold for $50,000. A working capital of $1,350,000 will be needed. The project is forecast to generate sales of agri-products over the seven years as follows: Year 1 70,000 units Year 2 100,000 units Years 3-5 250,000 units Years 6-7 325,000 units A sale price of $150 per unit for the first two years is expected and then decline to $90 per unit thereafter as the newness of the product loses some sheen. The variable expenses will amount to…