eoc_chapter_08 - Chapter 8 Problems 1-29 Input boxes in tan...

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Chapter 8 Problems 1-29 Input boxes in tan Output boxes in yellow Given data in blue Calculations in red Answers in green
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Chapter 8 Question 1 Input area: Year Cash flow 0 $(2,500) 1 400 2 1,300 3 700 4 600 Output area: Payback period 3.17 A B C D E 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19
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Chapter 8 Question 2 Input area: Annual cash inflow $700 # of years 8 Initial cost $3,400 . Output area: Payback period 4.86
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Chapter 8 Question 3 Input area: Year Cash Flow (A) Cash Flow (B) 0 $(38,000) $(70,000) 1 16,000 10,000 2 19,000 15,000 3 18,000 20,000 4 5,000 250,000 Required payback 3 Output area: Project A Payback 2.167 Project A Accept Project B Payback 3.100 Project B Reject
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Chapter 8 Question 4 Input area: Installation cost $13,000,000 # of years 4 Projected net income: Year 0 $1,210,000 Year 1 $1,720,000 Year 2 $1,465,000 Year 3 $1,313,000 . Output area: Average net income $1,427,000 Average book value $6,500,000 AAR 21.95%
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Chapter 8 Question 5 Input area: Required Return 18% Annual cash flows: Year 0 $(90,000) Year 1 $35,000 Year 2 $43,000 Year 3 $40,000 . Output area: IRR 14.51% Accept/Reject Reject
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Chapter 8 Question 6 Input area: Required Return 9% Required Return 23% Annual cash flows: Year 0 $(90,000) Year 1 $35,000 Year 2 $43,000 Year 3 $40,000 . Output area: NPV at 9% $9,189.67 Accept./Reject Accept NPV at 23% $(11,627.12) Accept/Reject Reject
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Chapter 8 Question 7 Input area: Required Return 8% Annual cash flows $1,000 Costs $4,900 # of years 8 . Output area: NPV $846.64 Accept/Reject Accept IRR 12.39% Indifferent about the project when R = IRR.
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Chapter 8 Question 8 Input area: Annual cash flows: Year 0 $(2,200) Year 1 $640 Year 2 $800 Year 3 $1,900 . Output area: IRR 19.72%
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Chapter 8 Question 9 Input area: Annual cash flows: Year 0 $(2,200) Year 1 $640 Year 2 $800 Year 3 $1,900 Discount rate 0% . Output area: NPV $1,140.00
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Chapter 8 Question 10 Input area: Annual cash flows: A B Year 0 $(20,000) $(20,000) Year 1 $10,000 $4,000 Year 2 $7,000 $4,500 Year 3 $5,000 $9,000 Year 4 $3,000 $9,500 Required return 11% Output area: IRR (A) 11.93% IRR (B) 11.19% The implication of ranked IRR is to accept Project A This may not be a correct decision however, because the IRR has a ranking problem for mutually exclusive projects To see if the ranked IRRs lead to the correct decision or not, we need to evaluate the project NPVs. NPV (A)
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eoc_chapter_08 - Chapter 8 Problems 1-29 Input boxes in tan...

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