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Orlov [11]
3 years ago
12

Consider the following cash flows of two projects for Fontana Rubber Parts Company. Assume the discount rate for Fontana Rubber

Parts is 14%.
Year Dry Prepreg Solvent Prepreg.
0 -$30,000 -$90,000
1 10,000 28,000
2 10,000 28,000
3 10,000 28,000
4 10,000 28,000
5 10,000 28,000
a. Calculate NPV, IRR, MIRR, payback, and discounted payback for each project
b. Assuming the projects are independent, which one(s) would you recommend?
c. If the projects are mutually exclusive, which would you recommend?
Business
1 answer:
marta [7]3 years ago
7 0

Answer:

Year           Dry Prepreg          discounted cash flow

0                   -$30,000                -$30,000

1                        10,000                    8,772

2                       10,000                    7,695

3                       10,000                    6,750

4                       10,000                    5,921

5                       10,000                    5,194

Year           Solvent Prepreg.           discounted cash flow

0                         -$90,000                   -$90,000

1                            28,000                       24,561

2                           28,000                       21,545

3                           28,000                       18,899

4                           28,000                       16,578

5                           28,000                      14,542

a. Calculate NPV, IRR, MIRR, payback, and discounted payback for each project

Dry Prepreg

NPV = $4,330

IRR = 19.86%

MIRR = 17.12%

payback = 3 years

discounted payback = 4.17 years

Solvent Prepreg

NPV = $6,130

IRR = 16.80%

MIRR = 15.51%

payback = 3.21 years

discounted payback = 4.58 years

b. Assuming the projects are independent, which one(s) would you recommend?

  • both projects, since their NPV is positive

c. If the projects are mutually exclusive, which would you recommend?

Dry prepreg becuase its IRR, MIRR are higher, and its payback and discounted payback periods are shorter.

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motikmotik

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Explanation:

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They want to make a profit of $55,498 Unit Variable costs = $11 Unit selling price is = $37 Fixed costs = $18,470 How many units
belka [17]

Answer:

2,845 units

Explanation:

To find the answer you need to consider that the profit is equal to the sales minus the costs.

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55,498=37x-11x-18,470

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According to this, the answer is that they need to sell 2,845 units to make the desired profit.

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sergey [27]

Answer:

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Hope it helps!

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igor_vitrenko [27]
C is the answer
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