You are a financial analyst for the Axum electronics company. The director of capital budgeting has asked you to analyze the proposed capital investment for project x. the project has a cost of $90000 and the cost of capital (ko) of the project is 12%. The project's expected life of the project is 5 years and the salvage value is zero. The project's expected net cash flows are as follows: Year 1 = 30000; year 2 = 30000; year 3 = 30000; year 4 = 30000; year 5 = 30000.
Calculate the project's payback period.
Calculate the project's net present value (NPV).
Determine the internal rate of return (IRR) of the project.
Should the project be accepted or not?
You are a financial analyst for the Axum electronics company. The director of capital budgeting has asked you to analyze the proposed capital investment for project x. the project has a cost of $90000 and the cost of capital (ko) of the project is 12%. The project's expected life of the project is 5 years and the salvage value is zero. The project's expected net cash flows are as follows: Year 1 = 30000; year 2 = 30000; year 3 = 30000; year 4 = 30000; year 5 = 30000.
Calculate the project's payback period.
Calculate the project's net present value (NPV).
Determine the internal rate of return (IRR) of the project.
Should the project be accepted or not?
Related questions
You are a financial analyst for the Waffle Company. The director of capital budgeting has asked you to analyze two proposed capital investments, Projects A and B. Each project has a cost of $50,000, and the cost of capital for each is 10%.
The projects’ expected net cash flows are as follows:
|
|
Expected Net Cash Flows |
|
|
Year |
Project A |
Project B |
|
0 |
($50,000) |
($50,000) |
|
1 |
25,000 |
15,000 |
|
2 |
20,000 |
15,000 |
|
3 |
10,000 |
15,000 |
|
4 |
5,000 |
15,000 |
|
5 |
5,000 |
15,000 |
- Calculate each project’s payback period, net present value (NPV), internal rate of return (IRR), modified internal rate of return (MIRR), and profitability index (PI).
Mr Yaqoob is a financial analyst for M/s Sheeraz & Co. The director of capital budgeting has asked Yaqoob to analyze two proposed capital investments, Projects X and Y. Each project has a cost of Rs. 5,000, and the cost of capital for each project is 10 percent. The projects’ expected net cash flows are as follows:
|
|
Expected Net Cash Flows |
|
|
Year |
Project X |
Project Y |
|
0 |
Rs. (5000) |
Rs. (5000) |
|
1 |
3250 |
1750 |
|
2 |
1500 |
1750 |
|
3 |
1500 |
1750 |
|
4 |
500 |
1750 |
- Calculate each project’s payback period, net present value (NPV), and internal rate of return (IRR). [3]
- Which project or projects should be accepted if they are independent? [0.5]
- Which project should be accepted if they are mutually exclusive? [0.5]
d. How might a change in the cost of capital produces a conflict between the NPV and IRR rankings of these two projects?
