Module 5 AssignmentComplete each of these problems using excel. Each problem is worth 5 points for a total of 60 points ...
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Module 5 Assignment
Complete each of these problems using excel. Each problem is worth 5 points for a total of 60 points for
the assignment. Your answer should be submitted in an excel file, with each problem being provided on
a separate sheet. Show your work and clearly label your answer.
1.)
A.
B.
C.
D.
2.)
A.
B.
C.
D.
E.
3.)
A project requires an initial investment of $21,600 and will produce cash inflows of $4,900,
$14,200, and $8,700 over the next three years, respectively.
What is the project's NPV at a required return of 14 percent?
What is the projectâs IRR?
What is the profitability index
What is the projectâs payback period? (round to two decimal points)
You are considering two independent projects. The required return for both projects is 13 percent.
Project A has an initial cost of $139,600 and cash inflows of $48,200, $54,600, and $68,700 for
Years 1 to 3, respectively. Project B has an initial cost of $94,200 and cash inflows of $67,600
and $41,200 for Years 1 and 2, respectively.
What is Project Aâs NPV?
What is Project Aâs IRR?
What is Project Bâs NPV?
What is Project Bâs IRR?
Which project(s) should you choose and why?
A project has an initial cost of $10,800 and produces cash inflows of $4,100, $4,800, and $5,600
over Years 1 to 3, respectively. What is the discounted payback period if the required rate of
return is 11 percent?
4.)
The Depot is considering a project with annual sales of $325,000 for four years. The profit margin
is 4.65 percent. The initial cost for equipment will be $330,000. The equipment will be depreciated
by $55,000 each year. The required average accounting rate of return is 11.4 percent.
A. Should this project be accepted or rejected?
B. What is the AAR?
5.)
A project has an initial cash inflow of $95,500 and cash flows of -$48,700 in Year 1 and -$57,200
in Year 2. The discount rate is 9 percent.
A. Should this project be accepted or rejected based on IRR?
B. Why?
Module 5 Assignment
Page 1 of 2
6.)
Riverton Sails currently produces boat sails and is considering expanding its operations to include
awnings for homes and travel trailers. The company owns land beside its current manufacturing
facility that could be used for the expansion. The company bought this land ten years ago at a
cost of $89,000 and spent $26,000 on grading and excavation costs at that time. Today, the land
is valued at $221,000. The company currently has some unused equipment that it currently owns
with a current market value of $45,000. This equipment could be used for producing awnings if
$9,000 is spent for equipment modifications. Other equipment costing $315,000 will be required.
What is the amount of the initial cash flow for this expansion project?
7.)
Julian's has spent $28,200 to design a new airline carryon bag. It spent another $48,500 testing
various materials for their durability. An additional $75,000 was spent on test marketing to
determine both the market demand and color preference. Since the test marketing proved
successful, the firm is now compiling data to evaluate the addition of this bag to its production
runs. The estimated production startup costs are $641,300 and annual costs thereafter of
$49,000. The discount rate is 12 percent and the estimated life of the project is 6 years. What
value should be used for the Time 0 cash flow?
8.)
Ernie's Electrical is evaluating a project that will increase sales by $39,000 and costs by $6,000.
The project will initially cost $102,000 for fixed assets that will be depreciated straight-line to a
zero book value over the 10-year life of the project. The applicable tax rate is 35 percent. What is
the operating cash flow for this project?
9.)
Uptown Motors is analyzing a project with sales of $420,000, depreciation of $30,000, and a net
working capital requirement of $56,000. The firm has a tax rate of 35 percent and a profit margin
of 5 percent. The firm has no interest expense. What is the amount of the operating cash flow?
10.) The Java House is considering a project that will produce sales of $47,500 and increase cash
expenses by $22,500. If the project is implemented, taxes will increase by $7,600. The additional
depreciation expense will be $10,100. An initial cash outlay of $7,300 is required for net working
capital. What is the amount of the operating cash flow using the top-down approach?
11.) Lefty's just purchased some equipment that is classified as 7-year property for MACRS. The
equipment cost $67,600. The MACRS table values are .1429, .2449, .1749, .1249, and .0893, for
Years 1 to 5, respectively. What will the book value of this equipment be at the end of four
years?
12.) Outdoor Gear is purchasing equipment costing $1.2 million that will lower manufacturing costs by
$280,000 a year. The equipment will be depreciated over 7 years using straight-line depreciation
to a book value of zero. After 7 years, the equipment will be worthless. The discount rate is 14
percent and the tax rate is 35 percent. What is the annual net income?
Module 5 Assignment
Page 2 of 2
Complete each of these problems using excel. Each problem is worth 5 points for a total of 60 points for
the assignment. Your answer should be submitted in an excel file, with each problem being provided on
a separate sheet. Show your work and clearly label your answer.
1.)
A.
B.
C.
D.
2.)
A.
B.
C.
D.
E.
3.)
A project requires an initial investment of $21,600 and will produce cash inflows of $4,900,
$14,200, and $8,700 over the next three years, respectively.
What is the project's NPV at a required return of 14 percent?
What is the projectâs IRR?
What is the profitability index
What is the projectâs payback period? (round to two decimal points)
You are considering two independent projects. The required return for both projects is 13 percent.
Project A has an initial cost of $139,600 and cash inflows of $48,200, $54,600, and $68,700 for
Years 1 to 3, respectively. Project B has an initial cost of $94,200 and cash inflows of $67,600
and $41,200 for Years 1 and 2, respectively.
What is Project Aâs NPV?
What is Project Aâs IRR?
What is Project Bâs NPV?
What is Project Bâs IRR?
Which project(s) should you choose and why?
A project has an initial cost of $10,800 and produces cash inflows of $4,100, $4,800, and $5,600
over Years 1 to 3, respectively. What is the discounted payback period if the required rate of
return is 11 percent?
4.)
The Depot is considering a project with annual sales of $325,000 for four years. The profit margin
is 4.65 percent. The initial cost for equipment will be $330,000. The equipment will be depreciated
by $55,000 each year. The required average accounting rate of return is 11.4 percent.
A. Should this project be accepted or rejected?
B. What is the AAR?
5.)
A project has an initial cash inflow of $95,500 and cash flows of -$48,700 in Year 1 and -$57,200
in Year 2. The discount rate is 9 percent.
A. Should this project be accepted or rejected based on IRR?
B. Why?
Module 5 Assignment
Page 1 of 2
6.)
Riverton Sails currently produces boat sails and is considering expanding its operations to include
awnings for homes and travel trailers. The company owns land beside its current manufacturing
facility that could be used for the expansion. The company bought this land ten years ago at a
cost of $89,000 and spent $26,000 on grading and excavation costs at that time. Today, the land
is valued at $221,000. The company currently has some unused equipment that it currently owns
with a current market value of $45,000. This equipment could be used for producing awnings if
$9,000 is spent for equipment modifications. Other equipment costing $315,000 will be required.
What is the amount of the initial cash flow for this expansion project?
7.)
Julian's has spent $28,200 to design a new airline carryon bag. It spent another $48,500 testing
various materials for their durability. An additional $75,000 was spent on test marketing to
determine both the market demand and color preference. Since the test marketing proved
successful, the firm is now compiling data to evaluate the addition of this bag to its production
runs. The estimated production startup costs are $641,300 and annual costs thereafter of
$49,000. The discount rate is 12 percent and the estimated life of the project is 6 years. What
value should be used for the Time 0 cash flow?
8.)
Ernie's Electrical is evaluating a project that will increase sales by $39,000 and costs by $6,000.
The project will initially cost $102,000 for fixed assets that will be depreciated straight-line to a
zero book value over the 10-year life of the project. The applicable tax rate is 35 percent. What is
the operating cash flow for this project?
9.)
Uptown Motors is analyzing a project with sales of $420,000, depreciation of $30,000, and a net
working capital requirement of $56,000. The firm has a tax rate of 35 percent and a profit margin
of 5 percent. The firm has no interest expense. What is the amount of the operating cash flow?
10.) The Java House is considering a project that will produce sales of $47,500 and increase cash
expenses by $22,500. If the project is implemented, taxes will increase by $7,600. The additional
depreciation expense will be $10,100. An initial cash outlay of $7,300 is required for net working
capital. What is the amount of the operating cash flow using the top-down approach?
11.) Lefty's just purchased some equipment that is classified as 7-year property for MACRS. The
equipment cost $67,600. The MACRS table values are .1429, .2449, .1749, .1249, and .0893, for
Years 1 to 5, respectively. What will the book value of this equipment be at the end of four
years?
12.) Outdoor Gear is purchasing equipment costing $1.2 million that will lower manufacturing costs by
$280,000 a year. The equipment will be depreciated over 7 years using straight-line depreciation
to a book value of zero. After 7 years, the equipment will be worthless. The discount rate is 14
percent and the tax rate is 35 percent. What is the annual net income?
Module 5 Assignment
Page 2 of 2
