Mike Wallace is interested in determining the NPV perpetuity of the following project. Answer to the nearest
Question:
Mike Wallace is interested in determining the NPV perpetuity of the following project. Answer to the nearest cent. (2 Marks) Show all workings.
NPV = -12,500
Interest rate = 11%
Number of years of the project: 6
b) Mike Wallace is interested in determining the EAC of the following project. Answer to the nearest cent. (2 Marks) Show all workings.
NPV = -12,000
Interest rate = 8%
Number of years of the project: 7
c) The following information was presented to you by your finance manager as they are trying to determine which projects the firm should invest in.
Project | NPV | PV of future CFs | Initial Investment |
A | 42000 | 62000 |
|
B |
| 92000 | 18000 |
C | 22000 |
| 8000 |
D | 31000 | 42000 |
|
E | 41000 |
| 12000 |
The finance manager has just $30,000 to invest. Which Projects should the finance manager choose based on profitability index? Write these in the order of preference. (5 Marks)
Expert Answer:
a To determine the NPV perpetuity of the project we can use the formula NPV Cash Flow Discount Rate ... View the full answer
