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FIN 370 WEEK 3 INDIVIDUAL LAB
Q-1 (Net present value calculation) Big Steve's, makers of swizzle sticks, is considering the purchase of a new plastic stamping machine. This investment requires an intial outlay of $110,000 and will generate net cash inflows of $19,000 per year for 9years.
a. What is the project's NPV using a discount rate of 11%? Should the project be accepted? Why or why not?
b. What is the project's NPV using a discount rate of 14%? Should the project be accepted? Why or why not?
c. What is this project's internal rate of return? Should the project be accepted? Why or why not?
Q-2 (IRR calculation) what is the internal rate of return for the following project. An initial outlay of $11,500 resulting in a single cash inflow of $26,814 in 11 years.
The internal rate of return for the following project is .........
Q-3 (NPV and IRR calculation)East Coast Television is considering a project with an initial outlay of $X (you will have to determine this amount). It is expected that the project will produce a positive cash flow of $41,000 a year at the end of each year for the next 16 years. The appropriate discount rate for this project is 11 percent. If the project has a 14 percent internal rate of return, what is the project’s net present value?
Q-4 (IRR and NPV calculation) The cash flows for three independent projects are found below:
a. calculate the IRR for each of the projects.
b. If the discount rate for all the three projects is 16%, which project or projects would you want to undertake?
c. What is the net present value of each of the projects where the appropriate discount rate is 16%?
Q-5 (IRR of an uneven cash flow stream)Microwave Oven Programming, Inc. is considering the construction of a new plant. The plant will have an initial cash outlay of $7.7 million (CF0 = –$7.7 million), and will produce cash flows of $2.7 million at the end of year 1, $5.2million at the...