Structured Finance Week 5

# Structured Finance Week 5 - In order to calculate the NPV...

This preview shows pages 1–7. Sign up to view the full content.

Structured Finance Homework_5

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
10-8 NPVs, IRRs, and MIRRs for independent Projects 2. Calculations: For the truck (Project A) NPV = -$17,100 +$5,100(PVIFA 14%,5 PVIFA = (1 – 1/(1 + r) n )/r NPV = -$17,100 +$5,100(3.4331) = -$17,100 +$17,509 = $409. In order to calculate the IRR, I used both: the financial calculator , and Excel. IRR = 14.99% ~ 15% The project truck can be accepted. MIRR for the Truck is 14.54% For the Pulley (Project B) PVIFA = (1 – 1/(1 + r) n )/r PVIFA = 3.433 NPV = -$22,430 + $7,500(3.433) = -$22,430 + $25,748 =$3,318. In order to calculate the IRR, I have used both the financial calculator , and Excel. IRR for the Pulley is 19.99% = ~ 20.00%.

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
In order to calculate the MIRR, I have used Excel. MIRR for the Pulley is 17.19% Answer: The project Pulley can be accepted.
10-9 NPVs and IRRs for Mutually Exclusive Projects 2. Calculations. In order to calculate the NPV and IRR for the electric-powered truck, I have used the online financial calculator.

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: In order to calculate the NPV for the gas-powered truck, I have used the online financial calculator. 11-2 Operating Cash Flow The formula for Operating Cash Flow is: EBIT = EBIT ( earnings before interest and taxes) + Depreciation- Taxes. EBIT = $10,000,000 –$7,000,000 – $2,000,000 = 1,000,000 The above calculated$1 million is an undiscounted cash flow before tax. 40% * 1,000,000 = $400,000 Operating Cash Flow =$1,000,000 + $2,000,000 –$400,000 = $2,600,000. Answer: The company’s Operating Cash Flow is$2,600,000. 11-3 Net Salvage Value 2. Calculations: Equipment's original cost $20,000,000 Depreciation (80%) 16,000,000 Book value =$20,000,000 – $16,000,000 -$ 4,000,000 Gain on sale = $5,000,000 -$4,000,000 = $1,000,000 Tax on gain =$1,000,000(0.4) = $400,000 The net salvage value =$5,000,000 - $400,000 =$4,600,000. Answer: The after-tax net salvage value is \$4,600,000....
View Full Document

{[ snackBarMessage ]}

### Page1 / 7

Structured Finance Week 5 - In order to calculate the NPV...

This preview shows document pages 1 - 7. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online