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4 years ago

Your division is considering two projects with the following cash flows (in millions):

Business

2 answers:

eimsori [14]4 years ago

8 0

Answer:

Explanation:

1.If WACC = 5%

Project A

Year Cash Flow PV factor @5% (a)* (b)

(b)

0 -$29 1 - $29

1 $15 0.952 $14.28

2 $13 0.907 $11.791

3 $3 0.864 $2.592

__________

NPV = - $ 0.337 millions

Project B

Year Cash Flow PV factor @5% (a)* (b)

(b)

0 -$16 1 - $16

1 $8 0.952 $7.616

2 $3 0.907 $2.721

3 $6 0.864 $5.184

__________

NPV = - $ 0.479 millions

2. If WACC = 10 %

Project A

Year Cash Flow PV factor @10% (a)* (b)

(b)

0 -$29 1 - $29

1 $15 0.909 $13.635

2 $13 0.826 $10.738

3 $3 0.751 $2.253

__________

NPV = - $ 2.374 millions

Project B

Year Cash Flow PV factor @10% (a)* (b)

(b)

0 -$16 1 - $16

1 $8 0.909 $7.272

2 $3 0.826 $2.478

3 $6 0.751 $4.506

__________

NPV = - $ 1.744 millions

3. If WACC = 15%

Project A

Year Cash Flow PV factor @ 15% (a)* (b)

(b)

0 -$29 1 - $29

1 $15 0.870 $13.05

2 $13 0.756 $9.828

3 $3 0.658 $1.974

__________

NPV = -$ 4.148 millions

Project B

Year Cash Flow PV factor @15% (a)* (b)

(b)

0 -$16 1 - $16

1 $8 0.870 $6.96

2 $3 0.756 $2.268

3 $6 0.658 $3.948

__________

NPV = -$ 2.824 millions

4. If WACC = 5% , IRR = ?

Project A

Year Cash Flow PV factor @5% PV factor @ 4% (a)* (b) (a) *(c)

(b) (c)

0 -$29 1 1 - $29 -$29

1 $15 0.952 0.962 $14.28 $14.43

2 $13 0.907 0.925 $11.791 $12.025

3 $3 0.864 0.889 $2.592 $2.667

__________ ____________

NPV = - $ 0.337 m NPV = -$0.122 m

Since NPV is fairly close to zero at 4% value of r, therefore IRR ≈ 4%

Project B

Year Cash Flow PV factor @5% PV factor @ 3% (a)* (b) (a) * (c)

(b) (c)

0 -$16 1 1 - $16 -$16

1 $8 0.952 0.971 $7.616 $7.768

2 $3 0.907 0.943 $2.721 $2.829

3 $6 0.864 0.915 $5.184 $5.49

__________ ____________

NPV = -$ 0.479 m NPV= - $ .087

Since NPV is fairly close to zero at 3% value of r, therefore IRR ≈ 3%

5. If WACC = 10% , IRR = ?

Project A

Year Cash Flow PV factor @10% PV factor @ 8% (a)* (b) (a) *(c)

(b) (c)

0 -$29 1 1 - $29 -$29

1 $15 0.909 0.926 $13.635 $13.89

2 $13 0.826 0.857 $10.738 $11.141

3 $3 0.751 0.792 $2.253 $2.376

__________ ____________

NPV = - $ 2.374 m NPV = -$1.593 m

Since NPV is fairly close to zero at 8% value of r, therefore IRR ≈ 8%

Project B

Year Cash Flow PV factor @10% PV factor @ 8% (a)* (b) (a) * (c)

(b) (c)

0 -$16 1 1 - $16 -$16

1 $8 0.909 0.926 $ 7.272 $7.408

2 $3 0.826 0.857 $ 2.478 $2.571

3 $6 0.751 0.792 $ 4.506 $4.752

__________ ____________

NPV = - $ 1.744 m NPV= - $1.269

Since NPV is fairly close to zero at 8% value of r, therefore IRR ≈ 8%

6. If WACC = 15% , IRR =?

Project A

Year Cash Flow PV factor @ 15% (a)* (b)

(b)

0 -$29 1 - $29

1 $15 0.870 $13.05

2 $13 0.756 $9.828

3 $3 0.658 $1.974

__________

NPV = -$ 4.148 millions

NPV @ 8% = -$ 1.593

Since NPV is fairly close to zero at 8% value of r, therefore IRR ≈ 8%

Project B

Year Cash Flow PV factor @15% (a)* (b)

(b)

0 -$16 1 - $16

1 $8 0.870 $6.96

2 $3 0.756 $2.268

3 $6 0.658 $3.948

__________

NPV = -$ 2.824 millions

NPV @ 8% = -$1.269

Since NPV is fairly close to zero at 8% value of r, therefore IRR ≈ 8%

7.If WACC = 5%

Project A

Year Cash Flow PV factor @5% (a)* (b)

(b)

0 -$29 1 - $29

1 $15 0.952 $14.28

2 $13 0.907 $11.791

3 $3 0.864 $2.592

__________

NPV = - $ 0.337 millions

Project B

Year Cash Flow PV factor @5% (a)* (b)

(b)

0 -$16 1 - $16

1 $8 0.952 $7.616

2 $3 0.907 $2.721

3 $6 0.864 $5.184

__________

NPV = - $ 0.479 millions

NPV of project B > project A than choose Project B

2. If WACC = 10 %

Project A

Year Cash Flow PV factor @10% (a)* (b)

(b)

0 -$29 1 - $29

1 $15 0.909 $13.635

2 $13 0.826 $10.738

3 $3 0.751 $2.253

__________

NPV = - $ 2.374 millions

Project B

Year Cash Flow PV factor @10% (a)* (b)

(b)

0 -$16 1 - $16

1 $8 0.909 $7.272

2 $3 0.826 $2.478

3 $6 0.751 $4.506

__________

NPV = - $ 1.744 millions

NPV of project A > project B than choose Project A

3. If WACC = 15%

Project A

Year Cash Flow PV factor @ 15% (a)* (b)

(b)

0 -$29 1 - $29

1 $15 0.870 $13.05

2 $13 0.756 $9.828

3 $3 0.658 $1.974

__________

NPV = -$ 4.148 millions

Project BYear Cash Flow PV factor @15% (a)* (b)

(b)

0 -$16 1 - $16

1 $8 0.870 $6.96

2 $3 0.756 $2.268

3 $6 0.658 $3.948

__________

NPV = -$ 2.824 millions

NPV of project A > project B than choose Project A

Law Incorporation [45]4 years ago

4 0

Answer:

Below is attached the file containing answer of the above mention question

Explanation:

Download docx

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Enos Printing Corp. uses a job order cost system. The following data summarize the operations related to the first quarter’s pro

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Answer:

raw materials 197900

accounts payable 197900

WIP 161830

factory overhead 5270

raw materials 167100

WIP 85500

factory overhead 7600

wages payables 93100

factory overhead 53000

accounts payable 53000

factory overhead 17150

acc. Dep-equipment 17150

dep expense* 14800

acc. Dep- Off Building 14800

WIP** 70965

factory overhead 70965

Finished Goods*** 251747

WIP inventory 251747

Explanation:

* as the building is not related to the manufacturing process we cannot capitalized through inventory We will record as cost ofo the period therefore, depreciation expense

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3 years ago

Using the information presented above, determine the following: Determine EPS for Net Income ('x2) $_____________________ (Round

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Question Completion:

Income Before Taxes (from ongoing operations) $2,470,000

Income Tax Rate (’x2) 30%

5% Preferred Stock ($100 Par, 10,000 shares issued)

Common Stock ($1 par, 600,000 shares issued, 500,000 outstanding)

Answer:

The company's EPS is:

= 3.46

Explanation:

a) Data and Calculations:

Income Before Taxes (from ongoing operations) (’x2)= $2,470,000

Income Tax Rate (’x2) = (30% * $2,470,000) = $741,000

Net Income after taxes = $1,729,000

5% Preferred Stock ($100 Par, 10,000 shares issued) = $1,000,000

Common Stock ($1 par, 600,000 shares issued, 500,000 outstanding)

Outstanding common stock = $500,000

EPS (Earnings per share) = Net income after taxes/No. of outstanding shares

= $1,729,000/500,000

= $3.458

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