# Chapter 11 Homework Answers - NCF 11-19 = \$28,300 NCF 20 =...

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CHAPTER 11 CAPITAL BUDGETING DECISION CRITERIA AND RISK ANALYSIS SOLUTIONS TO PROBLEMS: 4. a. NINV = \$375,000 NCF 1-9 = \$80,000 NCF 10 = \$215,000 NPV = \$120,484.23 (using a financial calculator) b. The project is acceptable, because its NPV is positive. c. The value of the firm, and therefore the shareholders’ wealth, is increased by \$120,48423 (using a calculator) as a result of undertaking this project. d. The IRR of this project is 18.71% using a calculator. e. The net present value calculation assumes the net cash flows are reinvested at 12%, the project’s required return. The internal rate of return calculation assumes the net cash flows are reinvested at18.71%, the project’s IRR. 7. NINV = \$31,400 NCF 1-19 = \$6,040 NCF 20 = \$7,240 NPV = \$13,839.84 (using a financial calculator) Therefore, the old control device should be replaced. 11. a. NINV = \$170,000 NCF 1-10 = \$21,300

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Unformatted text preview: NCF 11-19 = \$28,300 NCF 20 = \$351,896 NPV = \$18,899.17 (using a financial calculator) Yes, because NPV > 0 b. NPV = \$-2,240.65 (using a financial calculator) No, because NPV < 0 80 Chapter 11 – Capital Budgeting Decision Criteria and Risk Analysis . 13. a. NPV A = \$4,331 NPV B = \$8,662 b. IRR A = 19.86% IRR B = 19.86% c. PI A = 1.14 PI B = 1.14 d. PB A = 3 years PB B = 3 years e. Wang should accept project B because its NPV is positive and higher than the NPV of project A. A will add more to shareholder wealth than B. 15. a. NPV = -\$250,762 b. The project is unacceptable since NPV < 0. . c. IRR = 6.64% (using a financial calculator) 22. a. NPV = \$1,803 (by financial calculator) b. IRR = 12.77% (by financial calculator) c. PI = 1.020 (by calculator) d. The project should be accepted since its NPV is positive. 81...
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## This note was uploaded on 08/22/2009 for the course FIN 3310 taught by Professor Potts during the Spring '08 term at Baylor.

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Chapter 11 Homework Answers - NCF 11-19 = \$28,300 NCF 20 =...

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