# Cap Budgeting Cp Sol

**Topics:**Net present value, Internal rate of return, Cash flow

**Pages:**2 (486 words)

**Published:**April 25, 2015

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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