6 Anderson International Limited is evaluating a project in Erewhon. The project will create the following cash flows: Year Cash Flow $592.000 0.5 point 0 2 3 222.000 165,000 230.000 209,000 efloor References All cash flows will occur in Erewhon and are expressed in dollars. In an attempt to improve its economy, the Erewhonian government has declared that all cash flows created by a foreign company are "blocked" and must be reinvested with the government for one year. The reinvestment rate for these funds is 5 percent. Assume Anderson uses a required return of 13 percent on this project. a. What is the NPV of the project? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What is the IRR of the project? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a. NPV b. IRR % 7 0.5 points A project that provides annual cash flows of $2,620 for eight years costs $9.430 today. a. At a required return of 8 percent, what is the NPV of the project? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. At a required return of 24 percent, what is the NPV of the project? (A negative answer should be indicated by a minus sign. Do not round Intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. At what discount rate would you be indifferent between accepting the project and rejecting it? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) eBook Hint a. NPV b. NPV eferences c. Discount rate % 00 0.5 points The Whenworth Corporation is trying to choose between the following two mutually exclusive design projects: Year Cash Flow (0 Cash Flow (1) o -$88,000 -$56,000 1 37.900 11,400 2 48,000 35,500 3 28,000 29,500 eBook References a-1. If the required return is 11 percent, what is the profitability index for each project? (Do not round intermediate calculations and round your answers to 3 decimal places, e.g., 32.161.) a-2. If the company applies the profitability index decision rule, which project should it take? b-1. If the required return is 11 percent, what is the NPV for each project? (Do not round intermediate culations and round your answers to 2 decimal places, e.... 32.16.) b-2. If the company applies the net present value decision rule, which project should it take? a-1. Project 1 Project 11 a-2. b-1. Project 1 Project II 05 Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) O -$425.000 $40.000 1 44,000 20,400 62,000 13,300 3 79.000 18.600 4 540,000 15,400 References The required return on these investments is 10 percent a. What is the payback period for each project? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) b. What is the NPV for each project? (Do not round Intermediate calculations and round your answers to 2 decimal places, e.g.. 32.16.) c. What is the IRR for each project? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g.. 32.16.) d. What is the profitability index for each project? (Do not round intermediate calculations and nd your answers to 3 decimal places, e.g.. 32.161.) e. Based on your answers in (a) through (d), which project will you finally choose? years years a. Project A Project B b. Project A Project B c. Project A Project B d. Project A Project B % % e. 10 0.5 points Bausch Company is presented with the following two mutually exclusive projects. The required return for both projects is 19 percent. Year Project M Project N O - $140,000 -$355,000 1 63,500 152,500 2 81,500 180,000 3 72,500 137.500 4 58,500 110,000 eBook References a. What is the IRR for each project? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) b. What is the NPV for each project? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) c. Which, if either, of the projects should the company accept? % % a. Project M Project N b. Project M Project N c. Accept project