should the terminal cashflow be used to calculate the net present value of a company? Give reasons for your answer. 2. Calculate the net present value (NPV) with the information in the attached table.
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1. should the terminal cashflow be used to calculate the
2. Calculate the net present value (NPV) with the information in the attached table.
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- What is the IRR of the following set of cash flows? Year Cash Flow -$ 0 10,512 123 7,000 4,800 3,300 Multiple Choice 22.7% 25.09% 24.38% 23.9% 23.42%Year Initial Cost & Carrying amount Annual net cash flows Annual net profit 0 $ 150,000.00 1 $ 70,000.00 $ 50,000.00 $ 15,000.00 2 $ 42,000.00 $ 45,000.00 $ 17,000.00 3 $ 21,000.00 $ 40,000.00 $ 19,000.00 4 $ 7,000.00 $ 35,000.00 $ 21,000.00 5 $ - $ 30,000.00 $ 23,000.00 1. Terrys titles ltd is reviewing a capital investment proposal.The inital cost of the project and the net cash flows for every year presented in the schedule above. It is estimate that there would be no salvage value at the end of the investments life.Terry's uses a required rate of return of 10 per cent to evaluate new capital investment proposals. a. Calculate the…Year Net Cash Flow Discount Factor Present Value (using the factor) Present Value (using Excel formula) 0 $ (3,500,000.00) 1 $ (3,500,000.00) ($3,500,000.00) 1 $ 900,000.00 0.90909 $ 818,181.00 $818,181.82 2 $ 900,000.00 0.82645 $ 743,805.00 $743,801.65 3 $ 900,000.00 0.75131 $ 676,179.00 $676,183.32 4 $ 900,000.00 0.68301 $ 614,709.00 $614,712.11 5 $ 900,000.00 0.62092 $ 558,828.00 $558,829.19 Net Present Value $ (88,298.00) $ (88,291.91) 3. Now assume that inflation is estimated as a 5% increase each year (starting with Year 1) for the entire 5 years. Calculate the new net cash flow values for each year. start with 5% increase for Year 1 net cash flow. Year Net Cash Flow 0 $…
- Year Net Cash Flow Discount Factor Present Value (using the factor) Present Value (using Excel formula) 0 $ (3,500,000.00) 1 $(3,500,000.00) ($3,500,000.00) 1 $900,000.00 0.90909 $818, 181.00 $818, 181.82 2 $ 900,000.00 0.82645 $743,805.00 $743, 801.65 3 $900,000.00 0.75131 $676, 179.00 $676, 183.32 4 $ 900,000.00 0.68301 $614,709.00 $614,712.11 5 $900,000.00 0.62092 $558, 828.00 $558,829.19 Net Present Value $(88,298.00) $(88,291.91) 3. Now assume that inflation is estimated as a 5% increase each year (starting with Year 1) for the entire 5 years. Calculate the new net cash flow values for each year. Hint: You should start with 5% increase for Year 1 net cash flow.Net cash flow Present value at 20% Net present value (s thousands) Period 0 -13,100 1 2 3 4 5 6 7 -1,534 2,997 6,373 10,584 10,035 5,807 -13,100 -1,278 2,081 3,688 5,104 4,033 1,945 3,319 926 3,399 (sum of PVs) Restate the above net cash flows in real terms. Discount the restated cash flows at a real discount rate. Assume a 20% nominal rate and 10% expected inflation. NPV should be unchanged at +3,399, or $3,399,000. Note: Negative answers should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers in thousands rounded to the nearest whole number. Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Real Net Cash Flows NPV $ (13,100)Initial investment (CF) Year (t) 1 2 3 4 5 6 7 8 9 10 - 1,150,000 Cash inflows (CF₂) $79,000 $140,000 $192,000 $252,000 $310,000 $379,000 $278,000 $103,000 $46,000 $25,000
- Assets 2001 2000 Cash 7,282 9,000 Short term investment 0 48,600 Acc. Receivable 632,160 351,200 Inventories 1,287,360 715,200 Total current assets 1,926,802 1,124,000 Fixed Assets Plant & Equipment 1,202,950 491,000 Less: Acc dep 263,160 146,200 939,790 344,800 Total assets 2,866,592 1,468,800 Liabilities & Equities Current liability A/c Payable 524,160 145,600 Notes payable 720,000 200,000 Accruals 489,600 136,000 total Current liability 1,733,760 481,600 Long-term debt 1,000,000 323,432 Common Stock 460,000 460,000 Retained Earning -327,168 203,768 1,132,832 987,200 Total equities 2,866,592 1,468,800 Income Statement Sales 5,834,400 3,432,000 Cost of Goods Sold 5,728,000 2,864,000 Other expense 680,000 340,000 dep 116,960 18,900…Provided information Cash flow Million Interest Cash flow Year rate Million 12% R-638 R-638 1 12% R160 R160 2 12% R200 R200 3 12% R200 R200 4 12% R200 R200ind the IRR for the following cash flows assuming a WACC of 10%. YR CF 0 -15,000 1 6,000 2 4,000 3 2,000 4 3,000 5 2,000
- D Open recovered wor x✓ fx 0 A B C D E F OMEGA PROJECT CASH FLOW INFORMATION Year Inflow Outflow = Newflow 0 1 2 3 G -$225,000 -$190,000 $150,000 $190,000 $215,000 $175,000 $197,000 $70,000 $582,000 $225,000 0 $190,000 $150,000 0 $220,000 $30,000 4 $215,000 0 5 $205,000 $30,000 6 $197,000 0 7 $100,000 $30,000 Total $1,087,000 $505,000 Required ROI 18% Project Omega NPV (Year 0) Project Omega Total NPV Which of the two projects would you fund and why? ▶ 3T Company Data + Ready have on project selection? (Reference Section 2.4, pg 38-39) 19 MAY 910 30 H NPV I K L M N O ALPHA PROJECT CASH FLOW INFORMATION Year Inflow Outflow = 0 1 $50,000 2 $150,000 3 $250,000 4 $250,000 5 $200,000 6 $180,000 7 $120,000 Total $ 1,200,000 Required ROI Project Alpha NPV (Year 1). Project Alpha NPV 1 tv $300,000 $100,000 0 $50,000 0 $50,000 0 $30,000 $530,000 18% d P Newflow -$300,005 -$50,000 $150,000 $200,000 $250,000 $150,000 $180,000 $90,000 $670,000 A Q NPVInitial Outlay Cash Flow in Period CF₁ CFO -20,000 7,730.85 The IRR is approximately: 20%. O 16%. O 14%. O 18%. CF2 7,730.85 CF3 7,730.85 CF4 7.730.85Cash Accounts receivable Equipment, net Land Total assets Current Year $7,440 $4,000 44,000 91,680 $197.120 Percent change Prior Year Required: Compute the annual dollar changes and percent changes for each of the following items $8,000 18,000 40,000 66,000 $132.000 (Use cells A2 to C7 from the given information to complete this question. Decreases should be entered with a minus sign. Round your percentage answers to one decimal place.) Cash Accounts receivable Equipment, net Horizontal Analysis Calculation of Percent Change Numerator: Current Year $7,440 54,000 44,000 Prior Year $8,000 18,000 40,000 Denominator: Dollar Change Change