Question
Alpha Mega Inc. is thinking about investing in a new piece of equipment at a total cost of $237,000. The project will last 5 years
Alpha Mega Inc. is thinking about investing in a new piece of equipment at a total cost of $237,000. The project will last 5 years at which time the equipment will be worthless. Their financial analyst has determined the following positive net income will result from this investment (NOTE: THIS IS NOT CASH!).
Alpha Mega Inc uses a WACC of 6.5% to evaluate projects of this nature.
NOTE: Problems 12-15 are based on very similar questions. HOWEVER, the NUMBERS for the problem may be different based on what version is randomly selected from Canvas. Do not assume the numbers stay the same.
1. What is the NPV for this project?
NPV = ___________ % (round to x.xx)
YearNet Income1 $33,000 2 $24,700 3 $28,500 4 $38,500 5 $34,5002. What is the IRR for this project?
IRR = ___________ % (round to x.xx)
Do not assume the same numbers as the last question
YearNet Income1 $33,000 2 $24,700 3 $28,500 4 $38,500 5 $34,5003.What is the payback period for this project?
Payback = ___________ years rounded to (4) x.xxxx
Do not assume the same numbers as the last questions
YearNet Income1 $32,800 2 $24,500 3 $28,300 4 $38,300 5 $34,3004. Regardless of the different number sets presented in problems 12-15, all numbers were relatively close enough to each other that the "go vs no-go" decision would be the same. Should Alpha Mega Inc. do this project? ___________ Yes or No and WHY??
Group of answer choices
Yes, PRIMARILY because NPV is positive
No, PRIMARILY because the NPV is negative
Yes, PRIMARILY because the payback period is less than the required term.
No, PRIMARILY because the IRR is less than the required rate of return.
Yes, PRIMARILY because IRR is greater than the required rate of return
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