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Finance help please, thank you! Please see attached. THANKS! HOMEWORK P10-22 Payback, NPV, and IRR. Rieger International is attempting to evaluate the feasibility of investing
Finance help please, thank you! Please see attached. THANKS!
HOMEWORK P10-22 Payback, NPV, and IRR. Rieger International is attempting to evaluate the feasibility of investing $95,000 in a piece of equipment that has a 5 year life. The firm has estimated the case inflows associated with the proposal as shown in the following table. The firm has 12% cost of capital. Year (t) 1 2 3 4 5 Cash inflows (CFt) $20,000 $25,000 $30,000 $35,000 $40,000 a) calculate the payback period for the proposed investment b) calculate the net present value (NPV) for the proposed investment c) calculate the internal rate of return (IRR), rounded to the nearest whole percent, for the proposed investment d) evaluate the acceptability of the proposed investment using NPV and IRR. What recommendation would you make relativ the project? Why? P12-4 Basic scenario analysis. Murdock Paints is in the process of evaluating two mutually exclusive additions to its processing capacity. The firm's financial analysis have developed pessimistic, most likely, and optimistic estimates of the annual cash inflows associated with each project. These estimates are shown in the following table. initial investment (CF) outcome pessimistic most likely optimistic Project A ($8,000) Project B ($8,000) 200 1000 1800 900 1000 1100 a) determine the range of annual cash inflows for each of the two projects b) assume that the firm's cost of capital is 10% and that both projects have 20-year lives. Construct a table similar to this on project. c)do parts a and b provide consistent views of the two projects? Explain d) which project do you recommend? Why? P11-3 Expansion versus replacement cash flows. Edison Systems has estimated the case flows over the 5-year lives for t summarized in the table below. Project A Project B Initial investment year $40,000 $12,000 operating cash inflows 1 $10,000 $6,000 2 $12,000 $6,000 3 $14,000 $6,000 4 $16,000 $6,000 5 $10,000 $6,000 after-tax cash inflow expected from liquidation a) If project A were actually a replacement for project B and the $12,000 initial investment shown for project B were the aft it, what would be the relevant cash flows for this replacement decision? b) How can an expansion decision such as porject A be viewed as a special form of a replacement dicision? Explain. P12-2 Breakeven cash inflows. The One Ring Company, a leading producer of fine cast silver jewelry, is considering the p that will allow it to expand its product line. The up-front cost of the equipment is $750,000.The company expects that the e throughout its 10-year life. a) If One Ring requires a 9% return on its investment, what minimum yearly cash inflow will be necessary for the company b) How would the minimum yearly cash inflow change if the company required a 12% return on its investmentStep by Step Solution
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