FI515_Homework5_BrianLin - Brian Lin D01278742 Week 5...

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Brian Lin D01278742 Week 5 Homework Chapter 10 Questions Problem 10-8 Edelman Engineering is considering including two pieces of equipment, a truck and an overhead pulley system, in this year’s capital budget. The projects are independent. The cash outlay for the truck is $17,100 and that for the pulley system is $22,430. The firm’s cost of capital is 14%. After-tax cash flows, including depreciation, are as follows: Year Truck Pulley 1 $5,100 $7,500 2 $5,100 $7,500 3 $5,100 $7,500 4 $5,100 $7,500 5 $5,100 $7,500 Calculate the IRR, the NPV, and the MIRR for each project, and indicate the correct accept-reject decision for each. Year Truck Present Value 0 (17,100) 1 $5,100 $4,473.68 2 $5,100 $3,924.28 3 $5,100 $3,442.35 4 $5,100 $3,019.61 5 $5,100 $2,648.78 NPV Truck = $408.71 IRR Truck = 14.99% MIRR Truck = 14.54% Accept Year Pulley Present Value 0 (22,430) 1 $7,500 $6,578.95 2 $7,500 $5,771.01 3 $7,500 $5,062.29 4 $7,500 $4,440.60 5 $7,500 $3,895.26 NPV Pulley = $3,318.11 IRR Pulley = 20.00% MIRR Pulley = 17.19% Accept
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This note was uploaded on 10/13/2011 for the course MAFM FI516 taught by Professor Anthonycriniti during the Spring '10 term at Keller Graduate School of Management.

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FI515_Homework5_BrianLin - Brian Lin D01278742 Week 5...

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