12. Consider Project B in Problem 7.8. Plot its PW(i) vs i. In addition, calculate the Project Balances (PB) of Project B (using i* where PB(i*) = 0). Does it pass the Net- Investment Test? Is it a pure investment or a mixed investment? Project B -$38,000 $32,000 $32,000 -$22,000
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- Calculate the net present value of each of the three hypothetical projects described below. Assume the interest rate is 5% Project A: You receive an immediate payoff of $1,000 Project B: You pay $100 today in order to receive $1,200 a year from now Project C: You receive $1,200 today but must pay $20o one year from now a. Which of the three projects would you choose to undertake based on your net present value calculations? Explain.Question 6 of 9 Due to a restricted budget, a company can only undertake one of the following projects: Project X: This project has an initial investment of $800,000 and annual profits of $400,000 in year 1, $375,000 in year 2 and $300,000 in year 3. Project Y: This project has an initial investment of $800,000 and a profit of $1,150,000 in year 3. a. Calculate the IRR for Project X. % Round to two decimal places b. Calculate the IRR for Project Y. % Round to two decimal places c. Which project should the company undertake? (click to select)Project XProject Y34. Skyscrapers Corporation is engaged in the manufacturing of standard wide flange section of steel whose selling price is P690. For the average monthly production of wide flange, the cost of production y is approximately related to the number of units produced x by the following equation. y = 0.5x? + 400x + 24,000. What is investment rate corresponding to a volume of production to earn the maximum rate of return of capital
- What process does the net present value method use to help management determine whether a project is acceptable to a company? Options : A. It discounts net cash flows to their present value and then compares that value to the capital outlay required by the project.B. It determines the interest rate that will cause the present value of the capital expenditure to equal the present value of the expected net cash flows.C. It divides the present value of net cash flows by the initial investment to determine the profitability index of the project.D. It identifies the time period required to recover the cost of the capital investment from the net annual cash flow produced by the project.You are a financial analyst for the ABC Company. The director of capital budgeting has asked you to analyse a proposed capital investment 'Projects A' which promises the cashflows as shown below. The project has a cost of capital of 6%. Calculate the project's DPBP, NPV and Pl. Based on all those parameters, would you recommend investing into this project and why? Use the table and fields below to complete the task. Time 1 Cash flow -€7,000 €5,500 €1,000 €2,000 Discounted cash flow Accumulated discounted cash flow NPV PI (show the calculation) DPBP (show the calculation)Bob has the option of undertaking one of two investment projects, each of which requires an initial investment outlay of $2,500. Payouts to each project are realized at the end of years 1,2 and 3, and are shown in the table below. c. Generally speaking, how does an increase in interest rates affect the desirability of undertaking projects whose returns are enjoyed much further into the future? Explain. Year 1 Year 2 Year 3 1,000 1,475 1,000 1,000 Project 1 Project 2 600 1,000
- 1. A project earns $10,000 a year for five years. The present total value of the project is (using a discount rate of 5.75%): 2. a) $50,000 b) more than $50,000 c) less than $50,000 The NPV of a project is $1,012, using a discount rate of 9.75% p.a. The rate of return on this project is: a. 9.75% b. more than 9.75% c. less than 9.75%NPV. A proposed nuclear power plant will cost $2.2 billion to build and then will produce cash flows of $300 million a year for 15 years. After that period (in year 15), it must be decommissioned at a cost of $900 million. a.What is project NPV if the discount rate is 5%? b. What if the discount rate is 18%? Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.QUESTION TWO (2) Assume you are managing a one-year project and have listed the project earned management value as below. Note that PV is the planned value, EV is the earned value, AC is the actual cost, and BAC is the budget at completion. PV = $25,000 EV = $22,000 AC = $27,000 BAC = $122,500 Review the project and answer the following to find your project status. a. Calculate the following for the project. i. Cost variance ii. Schedule variance iii. Cost performance index (CPI) iv. Schedule performance index (SPI) b. Discuss the project status whether it is ahead of schedule or behind schedule and whether it is under budget or over budget. c. Use the CPI to calculate the estimate at completion (EAC) for this project. Is the project performing better or worse than planned? d. Use the SPI to estimate how long it will take to finish this project.
- Which type of project is called a pure investment project?REQUIRED Study the information given below and answer the following questions: 5.1 Calculate the Payback Period of Project A (expressed in years, months and days). Calculate the Accounting Rate of Return on average investment of Project A (expressed to two decimal places). 5.2 5.3 Calculate the Benefit Cost Ratio of both projects (expressed to two decimal places). 5.4 Refer to yours answers in question 5.3. Which project should be chosen? Why? 5.5 Calculate the Internal Rate of Return of Project B (expressed to two decimal places). Your answer must include two net present value calculations (using consecutive rates/percentages) and interpolation. INFORMATION The following information relates to two capital expenditure projects. Because of capital rationing, only one project can be chosen. Initial cost Expected useful life Expected scrap value Depreciation per year Expected net profit: End of year 1 2 3 4 5 Project A R900 000 5 years R100 000 R160 000 R 100 000 140 000 150 000 120 000…B-2. A firm must decide whether to construct a small, medium or large stamping plant. A consultant’s report indicates a 0.20 probability that demand will be low and 0.80 that demand will be high. If the firm builds a small facility and demand turns out to be low, the Net Present Value (NPV) will be $42M. If demand turns out to be high, the firm can either subcontract and realize the NPV of $42M or expand greatly for a Net Present Value of $48M. The firm could build a medium size facility as a hedge: if demand turns out to be low, its NPV is estimated at $22M; if demand turns out to be high, the firm could do nothing and realize a NPV of $46M, or could expand and realize a NPV of $50M. If the firm builds a large facility and demand is low, the NPV will be ($20M), whereas high demand will result in a NPV of $72M. Analyze and solve this problem using a decision tree What is the Maximin Alternative and c) Compute the…