SHOW ALLYOUR WORK IUNCLUDING INPUTS, OUTPUTS AND FINAL ANSWERS for full credit. 1. National Inc. is considering Project A . Cash flows for Project A are as follows: An initial outlay or cost of $15,000 at time 0. No cash flows in year 1 and year 2. In year 3, 4, and 5, positive cash flows equal $10,000, $20,000, and $30,000 respectively. A) What is the internal rate of return (IRR) for this project? ___________ B) Assume the wacc = 6% and the Project is independent of other projects. Will you accept or reject this project? C) What is the NPV of the project should the wacc rise to equal the IRR in part A?_____________ SHOW ALLYOUR WORK IUNCLUDING INPUTS, OUTPUTS AND FINAL ANSWERS 2. National Inc. is considering Project B . Cash flows for Project B are as follows: An initial outlay or cost of $10,000 at time 0 and an additional outlay or cost of -5,000 in Year 1. Positive cash flows are expected to start in year 1 and continue until Year 5. The positive cash flows are estimated as follows: Positive cash flows Year 1 2,500 Year 2 10,000 Year 3 10,000 Year 4 12,000 Year 5 7,000 A) Are the net cash flows (positive and negative) normal or nonnormal cash flows?________________Explain your answer. B) What is the NPV of Project B if wacc = 10%?__________ C) Will you accept or reject Project B?__________ D) What is the NPV of Project A given in #1 if the wacc =10%?________ E) If Project A and Project B are mutually exclusive, which project(s) would you accept based on the NPV method and a wacc of 10%?_________________Explain your answer(s). . SHOW ALLYOUR WORK IUNCLUDING INPUTS, OUTPUTS AND FINAL ANSWERS 3. Given the following Cash Flows, complete the table below. What is the Payback Period? _______Assume you want your money back within 2 years. Would you accept this project? ____ Year Cash Flow Cumulative 0 -12,000 1 0 2 10,000 3 20,000 4 30,000 SHOW ALLYOUR WORK IUNCLUDING INPUTS, OUTPUTS AND FINAL ANSWERS 4. Complete the table below. What is the Discounted Payback Period? _____Assume you want your money back within 2.5 years. Assume wacc=8%. Would you accept this project? _______ Year Cash Flow PV Cash Flows Cumulative 0 -12,000 1 0 2 10,000 3 20,000 4 30,000 SHOW ALL YOUR STEPS SHOW ALLYOUR WORK IUNCLUDING INPUTS, OUTPUTS AND FINAL ANSWERS 5. A) Given the following Cash flows for Project C, calculate the Modified Internal Rate of Return (MIRR)? Assume the wacc is 12%. _________ B) Assume Project C is an independent project, would you accept or reject this project? Project A Year Cash Flow 0 -12,000 1 +6,000 2 -5,000 3 +12,000 4 +9,000 5 +10,000 SHOW ALLYOUR WORK IUNCLUDING INPUTS, OUTPUTS AND FINAL ANSWERS 6. A) Given the following Cash flows for Project D, calculate the Modified Internal Rate of Return (MIRR)? B) Assume the wacc is 12%. _________Would you accept or reject this project? Project B Year Cash Flow 0 -350,000 1 - 60,000 2 105,000 3 200,000 4 400,000 5 200,000 6 -50,000 SHOW ALLYOUR WORK IUNCLUDING INPUTS, OUTPUTS AND FINAL ANSWERS 7. A) If Project C and Project D were mutually exclusive, which project(s) would you accept based on the MIRR and wacc = 12%? _________Briefly explain your answer.