Example FIN 534 Week twelve

Home - Case Study VERY B 534 Week 10 - Example FIN 534 Week twelve

04.09.2019-741 views -Case Study VERY B 534 Week 10

 Case Study B 534 Week 10 Composition

Symone Reynolds

Homework -Week 10

Case Study

Your division is inconsideration for two purchases, each that requires an upfront expenditure of $25 million. You estimate the cost of capital is 10% and that the assets will produce the following after tax cash flows (in millions of dollars):

Year Job A

YearProject AProject B0 (25, 1000, 000. 00) PBP DPBP 15, 500, 00020, 500, 0001 5, 000, 500. 00 (20, 000, 500. 00)0. 909 4, 545, 000. 00 (20, 455, 000. 00)1 210, 000, 00010, 1000, 0002 twelve, 000, 500. 00 (10, 000, 1000. 00) 2 Years 0. 826 8, 260, 000. 00 (12, 195, 000. 00)2 315, 500, 0008, 1000, 0003 15, 000, 000. 00 your five, 000, 500. 00 almost 8 Months 0. 751 11, 265, 000. 00 (930, 000. 00) 3 Years 420, 000, 0006, 000, 0004 20, 1000, 000. 00 0. 683 13, 660, 000. 00 12, 730, 000. 00 1 Month

PV = 37, 730, 000. 00

Compute the following: By Computation Worksheet (Month/s happen to be rounded up)Cost 25, 500, 000. 00

Job AProject BNPV 12, 730, 000. 00

Payback period2 Years and almost 8 Months1 Season and six months time Discounted Payback Period3 Years and 1 Month1 Year and 12 MonthsPI =PV/Cost=1. 51 Net Present Value $12, 730, 000. 00 $11, 546, 000. 00 Profitability Index1. 511. 46

Internal Charge of return27. 27%36. 15%

Modified Inner Rate of return21. 93%20. 96%

YearProject B

zero (25, 1000, 000. 00) PBP DPBP

Project A (IRR)Rate10%1 20, 000, 500. 00 (5, 000, 1000. 00) one year 0. 909 18, 180, 000. 00 (6, 820, 000. 00)1 Year YearDataDescription2 10, 000, 000. 00 5, 1000, 000. 00 6 Months zero. 826 8, 260, 500. 00 one particular, 440, 500. 00 12 Months 0 (25, 000, 000. 00)Initial cost of a business3 almost 8, 000, 000. 00 13, 000, 500. 00 0. 751 6th, 008, 1000. 00 7, 448, 1000. 00 1 5, 1000, 000. 00 Net income pertaining to the initial year-80. 00%4 6, 500, 000. 00 0. 683...

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