Question: The expected cash flows each year from the well for project Well One, Well Two and Well Three are shown in the tables. 1. Calculate
The expected cash flows each year from the well for project Well One, Well Two and Well Three are shown in the tables.
1. Calculate the payback period, modified internal rate of return (3 methods), net present value, profitability index of proposed projects. Determine which project is better and explain why.
2. Based on your analysis, explain what advantages and disadvantages of each method of evaluating investment projects has.
3. If the company finds financial resources for the development of two wells, which two projects would you recommend. Provided that the required rate of return is reduced by 2%.
* You should describe each step in detail and provide intermediate calculations. Add tables from Excel if necessary.
* Do not delete anything from the Word file.
* Write your answers after each question.
* Be careful when rounding. Leave two decimal places.
A1 X fx Question 1 A B D E F G H 1 J K L M N o Q 1 Question 1 2 3 1 r 0.14 2 r 0.14 3 r 0.14 4 Year CF Year CF Year CF 5 0 -510000 0 -815000 0 -665000 6 1 55000 1 1 90000 72000 96000 7 2 95000 2 2 120000 8 3 165000 3 120000 3 170000 9 4 4 190000 4 250000 5 180000 205000 140000 5 205000 5 10 11 225000 6 6 140000 6 210000 12 7 7 110000 7 115000 13 8 110000 85000 -85000 8 8 90000 45000 115000 90000 14 9 9 9 15 10 -110000 10 50000 16 11 -90000 17 18
Step by Step Solution
There are 3 Steps involved in it
To evaluate these projects lets calculate each financial metric requested Payback Period Net Present Value NPV Modified Internal Rate of Return MIRR a... View full answer
Get step-by-step solutions from verified subject matter experts