Calculate the Net Present Value (NPV) of the following cash flow stream if the required rate is
Question:
Calculate the Net Present Value (NPV) of the following cash flow stream if the required rate is 12%:
Year 0 1 2 3 4 5
Cash Flow (230,000) 60,000 60,000 60,000 60,000 60,000
Is this a good project for the business to accept? Explain why or why not.
(2) Calculate the Net Present Value (NPV) of the following cash flow projections based on a required rate of 10.5%:
Year 0 1 2 3 4
Cashflow (120,000) 35,000 47,500 55,000 62,000
Is this a good project for the business to accept? Explain why or why not.
(3) A company needs to decide if it will move forward with two new products that it is evaluating. The two initiatives have the following cash flow projections:
Project A.
Year 0 1 2 3 4
Cash flow -650,000 175,000 175,000 175,000 175,000
Based on the risk of each project, the company has a required rate of return of 11% for Project A and 11.5% for Project B. The company has a $1.5 million budget to spend on new projects for the year. Should the company move forward with one, both, or neither of the two new products? Show your work to support your answer.
(4) Calculate the internal rate of return (IRR) of the following cash flows:
Year 0 1 2 3 4 5 6 7
Cashflow(1,650,000) 330,000 365000 380000 415000 405000 370000 294000
(5) If a company has a required rate of return of 15%, should the following project be accepted based on these expected cash flows below?
Year 0 1 2 3 4 5 6
Cash Flow (274,000) 68,000 73,000 76,500 78,000 82,500 77,000
Please explain why or why not the company should move forward with this endeavor.
(6) Based on the investor expectations of earning at least 12%, should this projected below be completed?
Year 0 1 2 3 4 5 6
Cash Flow (133,000) 37,000 42,750 44,000 46,500 82,500 77,000
Please explain why or why not the company should move forward with this endeavor.
Corporate Finance A Focused Approach
ISBN: 978-1305637108
6th edition
Authors: Michael C. Ehrhardt, Eugene F. Brigham