Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Click the photos and answer the problems. Struggling with these. Thanks for the help. LIUIIDILIEI 'I.II'I: LUCIE 'Ll'l luau-3: 'L-UIP-u Krause Corp. is evaluating a
Click the photos and answer the problems. Struggling with these. Thanks for the help.
LIUIIDILIEI 'I.II'I: LUCIE 'Ll'l luau-3": 'L-UIP-u Krause Corp. is evaluating a proposed capital hudgeng project that will require an inial investment of $132,000. The project is expected to generate the following net cash flows: Year Cash Flow Year 1 $39,400 Year 2 $50,300 Year 3 $45,900 Year 4 $43,409 Assume the desired rate of return on a project of this type is 9%. What is the net present value of this project? $21,109.30 -$13,103.50 -$?,244.50 $13,003.00 0000 Suppose Krause Corp. has enough capital to fund the project, and the project is not competing for funding with other projects. Should Krause Corp. accept or reject this project? 0 Reject the project 0 Accept the project Three Waters Co. is evaluating a proposed capital budgeting project that will require an initial investment of $1.55D.D. The project is expected to generate the following net cash flows: $35D.D $4?5.D $4oo.ooo $4?5.ooo Three Waters Co. has been basing capital budgeng decisions on a project's NW; however. its new CFC! wants to start using the internal rate of return {IRE} method for capital budgeb'ng decisions. The CFC! says that the IRR is a better method, because percentages and returns are easier to understand and to compare to required returns. Thre Waters Co.'s WAGE is 1555. Which of the following is the IRR of the project? 0 5.5555 0 4.5555 0 3.5555 0 5.5555 0 l.% If this is an independent project. the IRR method states that the firm should the project. \fAn NW prole plots a project's NW at various costs of capital. A project's NW prole is shown as follows. Identify the range of costs of capital that a firm would use to accept and reject this project. N P'II' [Do liars] MID 311112151513 21] EDS-T UF GAPITAL [Percent] The point at which the NW prole intersects the horizontal axis represents the The net annual cash flows fer a capital expenditure prep-esal can be classied as either eenventienal {nerrnal} er nencenventianal {nennarmal}. The fellewing table lists the net annual sash flaws fer five prep-used projects. Project Year [I A - $ 142. 43 5 -$ 12?.??5 -$11n.125 s c -$111.sss D E -$131.425 which prajest er prajests exhibit a canventisnai cash flew siIearn? O Prujeets A and E O Prejects E. C. and D O Prejeet D uni}:r O Prejects D and E What information does the payback period provide? Suppose you are evaluating a project with the expected future cash inows shown in the following table. Your boss 1as asked you to calculate the project's net present value {NW}. You don't know the project's iniiJ'al cost. but you do mow the project's regular, or conventional. payback period is 2.5:] years. If the project's NWACCN is mile. the project's NW Year Cash Flow {rounded to the nearest dollar) is: Year 1 $3?5.D 0 $34,323 YearE swoops 0 $323 21's YearEl $4T5.D O $34D.294 Yearti- $4rs.ooo 0 $32,235 Which of the following statements indicate a disadvantage of using the regular payback period {not the discounted Jayback period} for capital budgeting decisions? Check all that apply. I:I The payback period is calculated using net income instead o1E cash flows. I:I The payback period does not take the project's entire lif'e into account. |:I The payback period does not take the time value of money into accountStep by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started