MGF301 - Assignment 4.xlsx

MGF301 - Assignment 4.xlsx - 365271 4 5000000-3652714=...

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MGF301 Assignment 4 Danny Yu [3546-4520] Mizuho Takegawa [3678-5939] 1. a. The payback period for the project occurs during the 8 th period. Period 5,000,000 Discount Rate Paybac k Amount Accum. Payback 1 500000 0.08 540000 540,000 4,460, 000 2 300000 0.08 324000 864,000 4,136, 000 3 500000 0.08 540000 1,404,000 3,596, 000 4 800000 0.08 864000 2,268,000 2,732, 000 5 800000 0.08 864000 3,132,000 1,868, 000 6 800000 0.08 864000 3,996,000 1,004, 000 7 800000 0.08 864000 4,860,000 140,0 00 8 800000 0.08 864000 5,724,000 - 724,0 00 9 800000 0.08 864000 6,588,000 ##### ### 10 800000 0.08 864000 7,452,000 ##### ### b. NPV = $1,347,286 Periods 9 and 10 are 0 because Management’s payback period cutoff is 8 years. Period 5,000,000 Discount Rate 1 500000 0.08 462963 2 300000 0.08 257201. 6 3 500000 0.08 396916. 1 4 800000 0.08 588023.
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9 5 800000 0.08 544466. 6 6 800000 0.08 504135. 7 7 800000 0.08 466792. 3 8 800000 0.08 432215. 1 9 800000 0.08 10 800000 0.08
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Unformatted text preview: 365271 4 5000000-3652714= 1,347,2 86 c. IRR (Internal Rate of Return) = 1% Periods 9 and 10 are 0 because Managements payback period cutoff is 8 years. Period-5,000,000 1 500000 2 300000 3 500000 4 800000 5 800000 6 800000 7 800000 8 800000 9 10 IRR= 1% d. The company should only accept the project if the annual cash flows last till 10 years, and not just 8, because period 8 is when the company reaches the payback period. 2. a. 6 & 4 Year Annuities 6 year Annuity - $4.36 (Machine A) 4 Year Annuity - $3.17 (Machine B) b. PV Machine A= 1,136,000 PV Machine B= 943,800 c. Machine A is the better choice. (260,550.4587) 3. NPV = -$4,225,978 4. a. NPV = $3,851,797 b. NPV = $4,154,250...
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MGF301 - Assignment 4.xlsx - 365271 4 5000000-3652714=...

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