06 Capital budgeting criteria lecture problems solutions -...

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Lecture problems – capital budgeting criteriaI Scream Ice Cream is considering a project that is expected to cost $500,000 today; produce cash flows of $170,000 in 1 year, $200,000 in 2 years, $250,000 in 3 years, and $100,000 in 4 years; and have a cost of capital of 9 percent. Would the firm accept the project based on NPV?
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Lecture problems – capital budgeting criteriaWhat is the NPV of a project that would cost $80,000 today and be expected to produce annual cash flows of $7,300 forever with the first annual cash flow expected in 1 year, if the cost of capital of the project is 9.36 percent?
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Lecture problems – capital budgeting criteriaI Scream Ice Cream is considering a project that is expected to cost $500,000 today; produce cash flows of $520,000 in 1 year, $0 in 2 years, $0 in 3 years, and X in 4 years; have a cost ofcapital of 10 percent; and have an NPV of $20,000. What is X?
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Lecture problems – capital budgeting criteriaI Scream Ice Cream is considering a project that is expected to cost $5,000 today; produce a cash flow of $5,500 in 1 year, and have an NPV of -$200. What is the cost of capital for the project?
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Lecture problems – capital budgeting criteria

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