Please answer the below questions,

Note: (the formula to be shown in an Excel Spreadsheet)

Q.1

Net Present Value (NPV) and Internal Rate of Return

A firm is considering a major expansion that will cost SAR 12,000,000.

Annual cash flows from the project are expected to be SAR 3,000,000 for 6 years.

The firm uses a discount rate of 10%.

Calculate the Net Present Value (NPV) and the Internal Rate of Return of the project and determine if the project is acceptable based on NPV and IRR decision criteria.

Q.2

Profitability Index (PI) and Payback Period

A firm is considering a major expansion that will cost SAR 15,000,000.

Annual cash flows from the project are expected to be SAR 3,975,000 for 7 years.

The firm uses a discount rate of 8%. It accepts the project if the project's payback is less than 5 years.

Calculate the Profitability Index (PI) and the Payback Period of the project and determine if the project is acceptable based on PI and the Payback Period decision criteria.

Q.3

Uneven cash flows

A firm is considering the two following projects with amounts in SAR.

(a) Calculate the NPV for each project assuming a discount rate of 8%.

(b) Explain which project is better and why.

Project AProject B

Cash outflow:(42,000,000)(42,000,000)

Cash Inflows:7,000,00023,000,000

9,000,00018,000,000

18,000,0009,000,000

22,000,0006,000,000

Q.4

Calculating Free Cash Flows

A firm is introducing a new product and expected change in net operating income of SAR 19,000,000. Its corporate tax is 21%. The project will also produce SAR 3,000,000 depreciation per year. In addition, this cause the following changes:

Without Project With Project

Accounts Receivable SAR 450,000 SAR 630,000

Inventory 650,000 800,000

Accounts Payable 700,000 940,000

What is the project's free cash flows for Year 1?

Q.5

Calculating project cash flows and NPV

A firm is considering the product line currently consisted of scooters to include gas-powered scooters and it can sell 6,000 of these per year for 8 years; as the end of year 8, the project will be terminated. The gas-powered scooters would sell for SAR 3,000 each with variable cost of SAR 1,400 for each one produced, annual fixed cost associated with production would be SAR 2,600,000. In addition, that would be SAR 15,000,000 initial outlay for the purchase of new production equipment. It assumes the initial expenditure will be depreciated using the straight-line method over 8 years and no salvage value. This project requires a SAR 1,000,000 in net working capital associated with inventory and the additional working capital investment will be recovered after the project terminated. The firm's corporate tax rate is 21%.

a)What is the initial outlay associated with this project?

b)What are the annual cash flows associated with this project for Years 1 through 8?

c)What is the terminal cash flow in Year 8?

What is the project's NPV with 9% required rate of return? Is it acceptable?

Note: (the formula to be shown in an Excel Spreadsheet)