Cap Budgeting Cp Sol

Topics: Net present value, Internal rate of return, Cash flow Pages: 2 (486 words) Published: April 25, 2015
Name: _____________________________ ID: ___________________ Section: ______ 1.
Adler Enterprises is considering a project that has the following cash flow and WACC data. What is the project's NPV? Note that a project's projected NPV can be negative, in which case it will be rejected.

WACC:
10.00%

Year:
0
1
2
3

Cash flows:
-$1,000
$450
$460
$470

Answer: 142.37
2. Choi Computer Systems is considering a project that has the following cash flow data. What is the project's IRR? Note that a project's projected IRR can be less than the WACC (and even negative), in which case it will be rejected.

Year:
0
1
2
3

Cash flows:
-$1,000
$450
$470
$490

Answer: 19.05%
3.ZumBahlen Inc. is considering the following mutually exclusive projects:

Project AProject B
YearCash FlowCash Flow
0 -$5,000 -$5,000
1 200 3,000
2 800 3,000
3 3,000 800
4 5,000 200

At what cost of capital will the net present value of the two projects be the same? (That is, what is the “crossover” rate?)

Answer: 16.15%
4. Hindelang Inc. is considering a project that has the following cash flow and WACC data. What is the project's MIRR? Note that a project's projected MIRR can be less than the WACC (and even negative), in which case it will be rejected.

WACC:
10.00%

Year:
0
1
2
3
4

Cash flows:
-$900
$300
$320
$340
$360

Answer: 14.01%
5. Stewart Associates is considering a project that has the following cash flow data. What is the project's payback?

Year:
0
1
2
3
4
5

Cash flows:
-$1,000
$300
$310
$320
$330
$340

Answer: 3.21 years
6. Bey Bikes is considering a project that has the following cash flow and WACC data. What is the project's discounted payback?

WACC:
10.00%

Year:
0
1
2
3
4...
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