Question
1.An investment in new software is expected to have the following cash flows over a three-year period . The discount rate is 12 percent? Year
1.An investment in new software is expected to have the following cash flows over a three-year period. The discount rate is 12 percent?
Year Cash Flow
0 -$28,900
1 $12,450
2 $19,630
3 $ 2,750
- A layoff is expected to have an immediate restructuring charge of $7,500 and save money for the firm according to the schedule below. The firm’s weighted average cost of capital is 11 percent (which may be used as the discount rate for average-risk investments).
Year Cash Inflows
1 $4,375
2 $ 0
3 $8,750
4 $4,100
- Productivity training for a firm’s employees should produce cost savings from productivity increases of $1,750 a year for four years. The training initially costs $10,600. The firm’s weighted average cost of capital is 13 percent (which may be used as the discount rate for average-risk investments).
- You are considering the following two mutually exclusive projects. The required rate of return is 11 percent (which is the same as the discount rate) for project A and 10 percent for project B. Which project should you accept and why?
Year Project A Project B
0 -$48,000 -$126,900
1 $18,400 $ 69,700
2 $31,300 $ 80,900
3 $11,700 $ 0
- You are considering two mutually exclusive projects with the following after-tax cash flows. Will your choice between the two projects differ if the required rate of return (which is the same as the discount rate) is 8 percent rather than 11 percent? If so, what should you do?
Year Project A Project B
0 -$240,000 -$198,000
1 $ 0 $110,800
2 $ 0 $ 82,500
3 $325,000 $ 45,000
PS: I need to show the work of how I arrived to the answer. Thanks. I need this today, if possible, please.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
To determine which project to accept in the first scenario we need to calculate the net present valu...Get Instant Access to Expert-Tailored Solutions
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Step: 2
Step: 3
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