Problem 1

Problem 2.

Problem 3

A project that provides annual cash flows of $16,800 for nine years costs $74,000 today What is the NPV for the project if the required return is 8 percent? (Do not round intermediate calculations. Round your answer to 2 decimal places, e.g., 32.16.) NPV At a required return of 8 percent, should the firm accept this project? cept Reject What is the NPV for the project if the required return is 20 percent? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) NPV At a required return of 20 percent, should the firm accept this project? ept Reject At what discount rate would you be indifferent between accepting the project and rejecting it? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Discount rate Consider the following two mutually exclusive projects: Cash Flow Cash Flow Year (X) (Y) 19,500 -$19,500 O 8,725 8,850 8,675 9,850 7,675 8,575 1 2 Calculate the IRR for each project. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) Project X Project Y What is the NPV of Projects X and Y at discount rates of 0 percent, 15 percent, and 25 percent? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) Project X Project Y 0% 15% 25% Consider the following two mutually exclusive projects: Cash Flow Cash Flow Year (A) (B) 354,000 48,000 23,600 21,600 19,100 14,200 1 41,000 61,000 61,000 436,000 2 4 Whichever project you choose, if any, you require a return of 14 percent on your investment. a-1 What is the payback period for each project? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) Project A years Project B years b-1 What is the discounted payback period for each project? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) Project A years Project B years b-2 lf you apply the discounted payback criterion, which investment will you choose? Project A Project B c-1 What is the NPV for each project? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) Project A Project B d-1 What is the IRR for each project? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) Project A Project B % d-2lf you apply the IRR criterion, which investment will you choose? Project A Project B e-1 What is the profitability index for each project? (Do not round intermediate calculations and round your answers to 3 decimal places, e.g., 32.161.) Project A Project B f. Based on your answers in (a) through (e), which project will you finally choose