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Assuming end of year cash flows, calculate the project's: a) the project's payback, b) IRR and c) NPV. 2) Should the project be undertaken? Why or why not?
1. Compute the relevant annual after-tax cash flow 2. Based on the computation in the #1, find the the following (after-tax)
How much of its $500,000 capital budget should be debt-financed to retain the same debt-equity ratio?
Problem: Present Values. Compute the present value with the information provided below.
Why is the present value important for understanding capital budgeting? Which is the best present value method and why?
The acceptance of a capital budgeting project is usually evaluated on its own merits.
Caledonia is considering two additional mutually exclusive projects. The cash flows associated with these projects are as follows:
The investment has an NPV of $20,850 based on a required rate of return of 12%. Calculate the payback period of the investment.
What is normally used as the discount rate in the net present value method? Have you ever heard of the replacement decision?
Why is it important for Ms. Roberts to determine her cost of capital before making this investment decision?
A present investment of $50,000 is expected to yield receipts of $8,330 a year for seven years. What is the internal rate of return on this investment?
The project has a cost of $12,200 and the cost of capital is 17%. What's the project's modified internal rate of return?
What is the discount rate at which the graph intersects the horizontal axis?
Question: What method do you think is the better one for making capital budgeting decisions---IRR or NPV? Detail if possible.
Include in your discussion the concept of the firm's composite cost of capital
The budget committee has received the following projects. They are mutually exclusive. The Company uses 10% as the rate of return.
As a minimum, apply the following capital budgeting techniques to assess the financial viability of your project:
The company must pay-off next year, the company's current ratio, and determining how to finance a major capital project
The system will be depreciated using MACRS over its depreciate life (5 years) to a zero salvage value.
Conflicts between NPV and IRR rules arise in choosing between two mutually exclusive projects
In what manner does depreciation expense affect investment projects?
Compute the profitability index of each investment. Which alternative is more profitable?
Please compute: a) Net Investment Cost of the plant b) Cash flows in years 1 through 4 of the project
They declared a 12% stock dividend. Calculate EPS before and after the stock dividend.
Problem: Make capital budgeting decisions utilizing various capital budgeting models.