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Could you show all formulas, and answer all questions in Yellow? Discount Rate = Required rate of return = 10% Expected Net Cash Flow Year
Could you show all formulas, and answer all questions in Yellow?
Discount Rate = Required rate of return = 10% Expected Net Cash Flow Year Franchise L Franchise S 0 0 -100 1 10 2 60 3 80 -100 65 50 20 Decision if Independent Decision if Mutually Projects Exclusive projects NPV > O so accept both Proj L because NPV > Projs a) Calculate NPV = IRR = MIRR $18.78 18.126% 16.50% Explain the difference between MIRR and IRR and when you would use MIRR. b) Find the payback and discount payback periods for these projects Franchise L 0 1 2 3 Franchise s 0 1 2 3 10 60 -100 65 50 20 -100 Cumulative CF -100 Payback Period 80 50 -90 -30 Cumulative CF Payback Period 2.38 years years Franchise L 0 1 2 3 Franchise S 0 1 2 3 -100 10 60 80 -100 65 50 20 PV of CF -100 $9.09 $49.59 $60.11 PV of CF - 100 ($90.91) ($41.32) $18.78 Cumulative CF Cumulative CF -100 Discounted Payback Period 2.69 years Discounted Payback Period years What is the usefulness of the payback and discounted payback methods? Are either of them useful for project decision making? c) Find the Crossover Point Step i) Calculate the difference between Franchise L & S Cashflows Year 0 0 1 2 -55 10 60 3 Step ii) Find the Crossover rate for these Cashflow Differences Crossover Rate = Explain what a crossover rate is. d) In an unrelated analysis, you have the opportunity to choose between the following two mutually exclusive projects. Discount rate = 10% Year Project X Project Y 0 (100,000) (100,000) 1 60,000 33,000 2 60,000 33,000 3 33,000 4 33,000 Mutually Exclusive Decision Calculate NPV = EAA = e) A different project being considered has the following Cash Flows Discount rate = 10% Year Project X 0 (800,000) 1 5,000,000 2 (5,000,000) Decision NPV = IRR = Explain why the decisions are contradictory, and explain which technique you should trustStep by Step Solution
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