Jetson Aircraft wants to determine whether to purchase a new machine. The machine is expected to generate $201,150 per year during its 15-year life. If it wants to earn at least 13 percent return on its investments, what is the maximum amount Jetson should pay to purchase the new machine?

 

9-6  Conventional Corporation is evaluating a capital budgeting project that will generate $600,000 per year for the next 10 years. The project costs $3.6 million, and Conventional's required rate of return is 11 percent. Should the project be purchased?

9-8. What is the internal rate of return (IRR) of a project that costs $20,070 if it is expected to generate $8,500 per year for three years?

 

9-10  Sylvester Pet Foods (SPF) is evaluating a capital budgeting project that costs $760,000. The project is expected to generate after-tax cash flows equal to $190,600 per year for seven years. SPF's required rate of return is 15 percent. Compute the project's

(a)net present value (NPV) and

(b)internal rate of return (IRR).

(c)Should the project be purchased?

 

9-12  Construct an NPV profile for a capital budgeting project that costs $64,000 and is expected to generate $18,200 per year for five years. Using the NPV profile, determine the project's internal rate of return (IRR) and its net present value (NPV) at required rates of return equal to 10 percent, 13 percent, and 15 percent.

 

9-14. What is the internal rate of return (IRR) for a project that costs $6,330 and is expected to generate $1,800 per year for the next five years? If the firm's required rate of return is 8.5 percent, what is the project's modified internal rate of return (MIRR)? Should the firm purchase the project?

 

9-16 Compute both the traditional payback period (PB) and the discounted payback period (DPB) for a project that costs $270,000 if it is expected to generate $75,000 per year for five years. The firm's required rate of return is 11 percent. Should the project be purchased?

 

9-18. Komfy Karz is evaluating a project that costs $365,000 and is expected to generate $260,000 and $175,000, respectively, during the next two years. If Komfy's required rate of return is 13 percent, what is the project's

(a)net present value,

(b)internal rate of return (IRR), and

(c)modified internal rate of return (MIRR)?

 

9-20 Compute the

(a)net present value,

(b)internal rate of return (IRR), and

(c)discounted payback period (DPB) for each of the following projects.

The firm's required rate of return is 14 percent.

 

Year.                    Project Alpha.               Project Beta

0                    $(268,000)                        $(300,000)

1                    120,000                                 0

2                    120,000                                 (80,000)

3                   120,000                                 555,000

Which project(s) should be purchased if they are independent? Which project(s) should be purchased if they are mutually exclusive?

 

9-21.  Compute the

(a)net present value,

(b)internal rate of return (IRR),

(c)modified internal rate of return (MIRR), and

(d)discounted payback period (DPB) for each of the following projects.

The firm's required rate of return is 13 percent.

Year            Project AB           Project LM           Project UV

0                 $(90,000)            $(100,000)          $ (96,500)

1                 39,000                          0               (55,000)

2                 39,000                          0               100,000

3                 39,000                     147,500            100,000