Question 4

INSTRUCTIONS:

1. Read the information below, including Parts a and b of Question 2.
2. Create a new Excel spreadsheet. Record your answers toallparts of the question into the spreadsheet. Usebold textto clearly label your responses to Part a and Part b.Save your work regularly.
3. Check the exam timer regularly. Allow ample time to upload your Excel spreadsheet before the exam ends.
4. Select theBrowse My Computerbutton to upload the completed Excel spreadsheet. It may take several seconds for the file to upload. Once uploaded, the name of the file will appear next toSelected Answer.
5. You can upload only one file in response to this question. You can replace the file as many times as you like.

(a) Find the NPV of the following independent projects (A, B, C and D). The required rate of return is 15.00%.p.a. (Assume all future cash flows occur at the end of each year). Based on your results, which project(s) should be accepted and why.

aining Time: 52 minutes, 10 seconds. estion Completion Status: "Select the Browse my Computer button to upload the completed Excel spreads upload. Once uploaded, the name of the file will appear next to Selected Answer 5. You can upload only one file in response to this question. You can replace the a) Find the NPV of the following independent projects (A, B, C and D). The required flows occur at the end of each year). Based on your results, which project(s) should Year 2 -5,500 500 3,500 4,000 B -3,000 1,300 1,300 1,300 1,300 1,300 C -7,500 3,000 1,000 1,000 3500 D -2.500 1.900 1. 800 1.600 (b) A firm is considering a new investment opportunity. The firm must select one of project. Machine A will last for 5 years. Machine B will last for 6 years. The firm inte means that the machines will be replaced once they reached their maximum usefu will be replaced with the same type of machine forever. Assume that revenues are The project team provided the following estimates: Detail Machine A Machineon Completion Status: firm is considering a new investment opportunity. The firm must select one of two ect. Machine A will last for 5 years. Machine B will last for 6 years. The firm intends to ins that the machines will be replaced once they reached their maximum useful life. ( be replaced with the same type of machine forever. Assume that revenues are receiv project team provided the following estimates: Detail Machine A Machine B Purchase Price $200,000 $175,000 Yearly Revenue $75,000 $50,000 Yearly Costs $6,000 $3,500 Salvage Value $5,000 $4,000 Useful Life 5 years 6 years has been estimated that the project beta is 1.4, the risk free rate is 3%.p.a, and the mark ssuming no taxes and no inflation, complete the analysis of the new investment opportun achine to use. ttach File Browse Local FilesYear 0 1 2 3 4 5 A -5,500 500 3,500 4,000 B -3,000 1,300 1,300 1,300 1,300 1,300 C -7,500 3,000 1,000 1,000 3500 D -2,500 1,900 1,600 1,600Detail Machine A Machine B Purchase Price $200,000 $175,000 Yearly Revenue $75,000 $50,000 Yearly Costs $6,000 $3,500 Salvage Value $5,000 $4,000 Useful Life 5 years 6 years