Structured Finance Week 5

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

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Structured Finance Homework_5
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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.
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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%.
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In order to calculate the MIRR, I have used Excel. MIRR for the Pulley is 17.19% Answer: The project Pulley can be accepted.
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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.
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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 companys 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....
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Structured Finance Week 5 - In order to calculate the NPV...

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