70.2K

Verified Solution

Link Copied!

7. Your division is considering two investment projects, each of which requires an up-front expenditure of $17 million. You estimate that the investments will produce the following net cash flows:

Year	Project A		Project B
1	$ 4,000,000		$20,000,000
2	10,000,000		10,000,000
3	20,000,000		6,000,000

1. What are the two projects' net present values, assuming the cost of capital is 5%? Do not round intermediate calculations. Round your answers to the nearest dollar.

Project A: $__

Project B: $__

What are the two projects' net present values, assuming the cost of capital is 10%? Do not round intermediate calculations. Round your answers to the nearest dollar.

Project A: $__

Project B: $__

What are the two projects' net present values, assuming the cost of capital is 15%? Do not round intermediate calculations. Round your answers to the nearest dollar.

Project A: $__

Project B: $__

2. What are the two projects' IRRs at these same costs of capital? Do not round intermediate calculations. Round your answers to two decimal places.

Project A: __ %

Project B: __%

8. Edelman Engineering is considering including two pieces of equipment, a truck, and an overhead pulley system, in this year's capital budget. The projects are independent. The cash outlay for the truck is $15,000, and that for the pulley system is $21,000. The firm's cost of capital is 11%. After-tax cash flows, including depreciation, are as follows:

Year	Truck		Pulley
1	$5,100		$7,500
2	5,100		7,500
3	5,100		7,500
4	5,100		7,500
5	5,100		7,500

Calculate the IRR, the NPV, and the MIRR for each project, and indicate the correct accept/reject decision for each. Do not round intermediate calculations. Round the monetary values to the nearest dollar and percentage values to two decimal places. Use a minus sign to enter negative values, if any.

	Truck			Pulley
	Value	Decision		Value	Decision
IRR	__%	(select one) Accept/Reject		__ %	(select one)Accept/Reject
NPV	$__	(select one) Accept/Reject		$ __	(select one) Accept/Reject
MIRR	__%	(select one) Accept/Reject		__%	(select one)Accept/Reject

Answer & Explanation Solved by verified expert

See Answer