1.Scott Enterprises is considering a project that has the following cash flow and cost of capital (r) data. What is the project’s NPV? Note that if a project’s expected NPV is negative, it should be rejected.
r:11.00% Year01234Cash flows?$1,000$350$350$350$350
2.Reed Enterprises is considering a project that has the following cash flow and cost of capital (r) data. What is the project’s NPV? Note that a project’s expected NPV can be negative, in which case it will be rejected.
r:10.00% Year0123Cash flows?$1,050$450$460$470
3.Hart Corp. is considering a project that has the following cash flow data. What is the project’s IRR? Note that a project’s IRR can be less than the cost of capital or negative, in both cases it will be rejected.
Year0123Cash flows?$1,000$425$425$425
4.Nichols Inc. is considering a project that has the following cash flow data. What is the project’s IRR? Note that a project’s IRR can be less than the cost of capital or negative, in both cases it will be rejected.
Year012345Cash flows?$1,250$325$325$325$325$325
5. Computer Consultants Inc. is considering a project that has the following cash flow and cost of capital (r) data. What is the project’s MIRR? Note that a project’s MIRR can be less than the cost of capital (and even negative), in which case it will be rejected.
r =10.00% Year0123Cash flows?$1,000$450$450$450
6.Worthington Inc. is considering a project that has the following cash flow data. What is the project’s payback?
Year0123Cash flows?$500$150$200$300
7.Craig’s Car Wash Inc. is considering a project that has the following cash flow and cost of capital (r) data. What is the project’s discounted payback?
r = 10.00% Year0123Cash flows?$900$500$500$500
8.You have just landed an internship in the CFO’s office of Hawkesworth Inc. Your first task is to estimate the Year 1 cash flow for a project with the following data. What is the Year 1 cash flow?
Sales revenues$13,000Depreciation$4,000Other operating costs$6,000Tax rate25.0%
9.Your new employer, Freeman Software, is considering a new project whose data are shown below. The equipment that would be used has a 3-year tax life, and the allowed depreciation rates for such property are 33.33%, 44.45%, 14.81%, and 7.41% for Years 1 through 4. Revenues and other operating costs are expected to be constant over the project’s 10-year expected life. What is the Year 1 cash flow?
Equipment cost (depreciable basis)$65,000Sales revenues, each year$60,000Operating costs (excl. deprec.)$25,000Tax rate25.0%
10.Century Roofing is thinking of opening a new warehouse, and the key data are shown below. The company owns the building that would be used, and it could sell it for $100,000 after taxes if it decides not to open the new warehouse. The equipment for the project would be depreciated by the straight-line method over the project’s 3-year life, after which it would be worth nothing and thus it would have a zero salvage value. No new working capital would be required, and revenues and other operating costs would be constant over the project’s 3-year life. What is the project’s NPV? (Hint: Cash flows are constant in Years 1-3.)
Project cost of capital (r)10.0%Opportunity cost$100,000Net equipment cost (depreciable basis)$65,000Straight-line deprec. rate for equipment33.333%Sales revenues, each year$123,000Operating costs (excl. deprec.), each year$25,000Tax rate25%
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