University Of Phoenix > finance. (A project has the following estimated cash flow stream:) (COMPLETE CORRECT ANSWERS)

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A) A project has the following estimated cash flow stream: Year Cash Flow Cumulative 0 -$4,800 -$4,800 1 1,200 -3,600 2 2,500 -1,100 3 3,400 2,300 4 1,700 4,000 Refer to the Table above. W... hat is the Payback Period for this project?______________(Show your work.) Payback period = If the company wants to make its money back within 3.5 years, does it accept or reject the project based on the payback period? B) Assume an investment project has an initial cost of $8,000 to cover the purchase of new equipment. It is estimated the new equipment will bring in an additional cash flow for the next four years. The expected annual cash flow from the use of the equipment is a positive cash flow of $7,000 for Year 1, $7,500 for Year 2, $8,000 for Year 3, and $8,500 for Year 4. These cash flows are entered in the Table below. Year Cash Flow PV Cash Flow Cumulative 0 -8000 (8000) -8,000.00 1 7000 6140.35 -1,859.65 2 7500 5771.01 3,911.36 3 8000 5399.77 9,311.13 4 8500 5032.68 14,343.81 Given the company’s wacc =14%, calculate the Discounted Payback Period for this investment project. (Show your work.) Discounted payback = Given the company’s criteria is 2.5 years, based on the Discounted Payback Period will the company accept or reject this project. Accept Explain C) Assume a project is expected to provide a positive cash flow of $14,000 per year for the next 5 years followed by a clean-up cost of 10,000 for year 6. Given the initial cost or dollar outlay today is $50,000, answer the following: 1) If the wacc = 8%, what is the NPV for the project? (Show your work by providing the inputs and outputs for the financial calculator.) 2) If the wacc = 16%, what is the NPV for the project? 3) At what interest rate, would NPV equal 0? (Show your work by providing the inputs and outputs for the financial calculator.) D) Compare two investments that are mutually exclusive. Assume wacc = 15%. Year Cash Flow (Project A) PV at 15% PV at 6% Cash Flow (Project B) PV at 15% PV at 6% 0 -$210,000 -$210,000 -$210,000 -$21,000 -$21,000 -$21,000 1 15,000 13,043.48 14,150.94 11,000 9,565.22 10,377.36 2 30,000 22,684.31 26,699.89 9,000 6,805.29 8,009.97 3 30,000 19,725.49 25,188.58 11,000 7,232.68 9,235.81 4 370,000 211,548.70 293,074.66 9,000 5,145.78 7,128.84 NPV 57,001.98 149,114.07 7,748.97 13,751.98 Calculate the IRR for project A._________ (Show your work by providing the inputs and outputs for the financial calculator.) Calculate the IRR for Project B. _________(Show your work by providing the inputs and outputs for the financial calculator.) Which project(s) will you choose? Project B Explain E) Modified Internal Rate of Return Year Project A Cash Flows FV (Terminal value) Project B Cash Flows FV(Terminal value) 0 (300) (405) 1 (387) (685.59) 134 2 (193) (310.83) 134 3 (100) (146.41) 134 4 600 798.60 134 5 600 726.00 134 6 850 935.00 134 7 (180) (180.00) 0 Calculate the MIRR for Project A______________. (Show your work by providing the inputs and outputs for the financial calculator.) Calculate the MIRR for Project B______________. (Show your work by providing the inputs and outputs for the financial calculator.) If the Projects are mutually exclusive, which project(s) would you choose? Project A. [Show More]

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