An investment opportunity costs $25,000 today, but promises to return $10,000 per year for 3 years, and then $20,000 per year for two more years.

/in /by

Capital Budgeting Final Exam

 

Save your time - order a paper!

Get your paper written from scratch within the tight deadline. Our service is a reliable solution to all your troubles. Place an order on any task and we will take care of it. You won’t have to worry about the quality and deadlines

Order Paper Now

Final Exam—Capital Budgeting           Name_______________   Score_________

 

An investment opportunity costs $25,000 today, but promises to return $10,000 per year for 3 years, and then $20,000 per year for two more years.  What is the payback period?  Show work on this page.

 

 

 

Project A and Project B have a cost of $24,000,000 today.  Project A will have cash flows of $10,000,000 per year for three years, while Project B will have cash flowsof $15,000,000 the first year, $10,000,000 the second year, and $7,000,000 the third year. 

 

Calculate the NPV and the IRR for Project A using a 12% cost of capital and show your work by using TWO of the following methods:  (1) using the formula, (2) identifying all variables using the calculator’s function keys, (3) using the steps on the calculator to calculate NPV and IRR.  Note it is an annuity since the cash flows are the same.

 

 

 

 

 

 

 

 

 

 

 

Calculate the NPV and the IRR for Project B using a 12% cost of capital and show your work by using TWO of the following methods:  (1) using the formula,(2) identifying all variables using the calculator’s function keys, (3) using the steps on thecalculator to calculate NPV and IRR.Note this project has different cash flows.

 

 

 

 

 

 

 

 

 

 

Should A, B, both A and B, or neither be accepted if the projects are independent.  Circle your choice

 

Should A, B, both A and B, or neither be accepted if the projects are mutually exclusive.  Circle your choice

 

Project X and Project Y have a cost of $50,000,000 today.  Project X will have cash flows of $20,000,000 per year for three years, while Project Y will have cash flowsof $18,000,000 the first year, $19,000,000 the second year, and $23,000,000 the third year. 

 

Calculate the NPV and the IRR for Project X using a 10% cost of capital and show your work by using TWO of the following methods:  (1) using the formula, (2) identifying all variables using the calculator’s function keys, (3) using the steps on the calculator to calculate NPV and IRR.  Note it is an annuity since the cash flows are the same.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Calculate the NPV and the IRR for Project Y using a 10% cost of capital and show your work by using TWO of the following methods:  (1) using the formula, (2) identifying all variables using the calculator’s function keys, (3) using the steps on the calculator to calculate NPV and IRR.  Note this project has different cash flows.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Should X, Y, both X and Y, or neither be accepted if the projects are independent.  Circle your choice

 

Should X, Y, both X and Y, or neither be accepted if the projects are mutually exclusive.  Circle your choice

The post An investment opportunity costs $25,000 today, but promises to return $10,000 per year for 3 years, and then $20,000 per year for two more years. appeared first on Infinitessays.org.