IF you can Answer them also by showing the calculations with Excel sheet, would be great dear please with showing the way of calculating and the formulas You are the capital budgeting analyst for Dubai Holding Co which is considering investments in the eight projects listed in the table below The chief financial officer asked you to rank the projects and recommend the four best that the company should accept In this assignment, only the quantitative considerations are relevant No other project characteristics are deciding factors in the selection, except that management has determined that projects 3 and 4 are mutually exclusive All the projects require the same initial investment, $40 million Moreover, all are believed to be of the same risk class The weighted average cost of capital of the firm has never been estimated In the past, analysts have simply assumed that 8 percent was an appropriate discount rate To stimulate your analysis, consider the following questions Can you rank the projects simply by inspecting the cash flows Show your ranking rank project Net present value (NPV) 1 3 2 5 3 8 4 4 5 1 6 7 7 6 8 2 Apply the 5 methods for analyzing the given 8 projects Rank the projects and make your recommendation based on the ranking and the above given information Project Free Cash Flows (dollars in thousands) Project number 1 2 3 4 5 6 7 8 Initial investment ($40,000) ($40,000) ($40,000) ($40,000) ($40,000) ($40,000) ($40,000) ($40,000) Year 1 $6,600 $33,320 $0 $3,200 $5,600 $44,000 $24,000 $7,000 2 $6,600 $6,680 $0 $4,000 $5,600 $0 $18,000 $1,200 3 $6,600 $3,300 $0 $7,000 $5,600 $0 $6,000 $1,200 4 $6,600 $0 SO $7,900 $5,600 $0 $1,800 $7,000 5 $6,600 $0 $0 $8,640 $5,600 $0 $1,400 $14,000 6 $6,600 $0 $0 $8,800 $5,600 $0 $0 $24,000 7 $6,600 $0 SO $8,840 $5,600 $0 $0 $45,000 8 $20,000 $0 $0 $8,880 $5,600 $0 $0 $o 9 $0 $0 $0 $8,920 $5,600 $0 $0 $0 10 $0 $o $0 $8,960 $5,600 $0 $0 $0 11 $0 $0 $0 $9,000 $5,600 $0 $0 $0 12 $0 $0 $0 $9,020 $5,600 $0 $0 $0 13 $0 $0 $0 $9,020 $5,600 $0 $0 $0 14 $0 $0 $0 $9,040 $5,600 $0 $0 $0 15 $200,000 ($40,000) $5,600 $0 $0 $0 $66,200 $43,300 $200,000 $71,220 $84,000 $44,000 $51,200 $83,000 Sum of cash flow benefits Excess of cash flow over initial investment $26,200 $3,300 $160,000 $31,220 $44,000 $4,000 $11,200 $43,000

The Answer is in the image, click to view ...

Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on Oct 04, 2024

IF you can Answer them also by showing the calculations with Excel sheet, would be great dear please with showing the way of calculating and

IF you can Answer them also by showing the calculations with Excel sheet, would be great dear please with showing the way of calculating and the formulas

You are the capital-budgeting analyst for Dubai Holding Co. which is considering investments in the eight projects listed in the table below. The chief financial officer asked you to rank the projects and recommend the four best that the company should accept.

In this assignment, only the quantitative considerations are relevant. No other project characteristics are deciding factors in the selection, except that management has determined that projects 3 and 4 are mutually exclusive.

All the projects require the same initial investment, $40 million. Moreover, all are believed to be of the same risk class. The weighted-average cost of capital of the firm has never been estimated. In the past, analysts have simply assumed that 8 percent was an appropriate discount rate.

To stimulate your analysis, consider the following questions:

Can you rank the projects simply by inspecting the cash flows? Show your ranking?

rank	project	Net present value (NPV)
1	3
2	5
3	8
4	4
5	1
6	7
7	6
8	2

Apply the 5 methods for analyzing the given 8 projects. Rank the projects and make your recommendation based on the ranking and the above given information.

image text in transcribed

Project Free Cash Flows (dollars in thousands) Project number: 1 2 3 4 5 6 7 8 Initial investment ($40,000) ($40,000) ($40,000) ($40,000) ($40,000) ($40,000) ($40,000) ($40,000) Year 1 $6,600 $33,320 $0 $3,200 $5,600 $44,000 $24,000 -$7,000 2 $6,600 $6,680 $0 $4,000 $5,600 $0 $18,000 $1,200 3 $6,600 $3,300 $0 $7,000 $5,600 $0 $6,000 $1,200 4 $6,600 $0 SO $7,900 $5,600 $0 $1,800 $7,000 5 $6,600 $0 $0 $8,640 $5,600 $0 $1,400 $14,000 6 $6,600 $0 $0 $8,800 $5,600 $0 $0 $24,000 7 $6,600 $0 SO $8,840 $5,600 $0 $0 $45,000 8 $20,000 $0 $0 $8,880 $5,600 $0 $0 $o 9 $0 $0 $0 $8,920 $5,600 $0 $0 $0 10 $0 $o $0 $8,960 $5,600 $0 $0 $0 11 $0 $0 $0 $9,000 $5,600 $0 $0 $0 12 $0 $0 $0 $9,020 $5,600 $0 $0 $0 13 $0 $0 $0 $9,020 $5,600 $0 $0 $0 14 $0 $0 $0 $9,040 $5,600 $0 $0 $0 15 $200,000 ($40,000) $5,600 $0 $0 $0 $66,200 $43,300 $200,000 $71,220 $84,000 $44,000 $51,200 $83,000 Sum of cash-flow benefits Excess of cash flow over initial investment $26,200 $3,300 $160,000 $31,220 $44,000 $4,000 $11,200 $43,000