CH 11a Miami Project Evaluation Applying NPV Decision Rule Questions


I don’t recognize how to treat this Business doubt and want control.

Important General Instructions for Reporting Numerical Answers:

- Do not entire interjacent calculations.

- Announce your confutations to the calculate of decimal establishs requested.

- Original inadequately instructed, rerereexplain bearings in the fond units. IE: if fond units are in $K, perfect your computations in these units and, as available, announce your confutation in these units (externally writing "$" or "K").

- Do not announce any numerical confutation as a percent. IE: for stance, write

0.324 instead of 32.4%.

- Announce privative calculates after a while a indispensable minus prefiguration, enjoy this (for stance):

-23.451

Not enjoy this: (23.451).

- Note that Canvas transports grafting uninfluential figures. If you emblem, for stance, 41.350, Canvas accomplish transport the developed decimal establish and annals your confutation as 41.35 This is elegant owing 41.35 = 41.350.

- Assume era is measured in years original inadequately formal.


Before starting this assignment, you are agreeable to tend the

"Practice Problems for HW11a" video, located here:

[embed]https://www.youtube.com/watch?v=NyO1VRqVvHY[/embed]

and at youtube.com/appliedfinancemodels in the FIN 301 playlist.


Q1:

A established evaluates all of its purposes by applying the NPV resolution government. A purpose subordinate suspect has the aftercited money flows:

Year Cash Flow
0 -24,000
1 15,000
2 -5,000
3 25,000

What is the NPV of the purpose if the convenience absorb of principal is 11 percent? (Do not entire interjacent calculations and entire your confutation to 2 decimal establishs, e.g., 32.16.)


Q2:

A established evaluates all of its purposes by applying the NPV resolution government. A purpose subordinate suspect has the aftercited money flows:

Year

Cash Flow

0

$

-34,000


1


15,000


2


17,000


3


13,000


If the NPV = $1.27, should the established consolid this purpose?

A. Yes

B. No


Q3:

If the NPV of the over purpose is as formal over, how abundant appraise does it add to the established, paralleld to investing in an Convenience Absorb Investment purpose?

A. This cannot be immovable externally recognizeing the convenience absorb of principal

B. $2.54
C. $1.27


Q4:

A established evaluates all of its purposes by applying the NPV resolution government. A purpose subordinate suspect has the aftercited money flows:

Year

Cash Flow

0

$

-34,000

1


15,000

2


17,000

3


13,000

What is the NPV of the purpose if the convenience absorb of principal is 24 percent? (A privative confutation should be implied by a minus prefiguration. Do not entire interjacent calculations and entire your confutation to 2 decimal establishs, e.g., 32.16.)


Q5:

A established evaluates all of its purposes by applying the NPV resolution government. A purpose subordinate suspect has the aftercited money flows:

Year

Cash Flow

0

$

-34,000


1


15,000


2


17,000


3


13,000


If the NPV of the purpose is -$5.44, should the established consolid this purpose?

B) No
A) Yes


Q6:

Consider these money flows:

Year

Cash Flow


0

$

-16,700



1


9,700



2


7,800



3


4,300





What is the BCR (profitability protest) for the set of money flows if rocc is 10 percent? (Do not entire interjacent calculations and entire your confutation to 2 decimal establishs, e.g., 32.16.)



Q7:

If the profitability protest (or BCR) for this set of money flows is 0.92, is this a cheerful investment from the DCF modeling perspective? Pick-out Yes, No or Not Sure, then supply a deduce for your confutation.

Year

Cash Flow


0

$

-16,700



1


9,700



2


7,800



3


4,300


A. We can't confutation this doubt externally recognizeing rocc.
B. Not certain
C. The BCR is a slender behalf of the purpose's decisive money flows.
D. The BCR government is to consolid purposes after a while BCR appraises near than 1.
E. No
F. The BCR government is to throw-by purposes after a while BCR appraises near than 1.
G. Yes


Q8:

Which is the rectify equation to use as a starting apex for response the IRR of a purpose after a while these money flows:

Year

Cash Flow

0

$

-15,400


1


7,300


2


9,100


3


5,900


A. 0 = NPV * 7300/(1+IRR) + 9100/(1+IRR)^2 + 5900/(1+IRR)^3
B. None of the equations are advantageous in response the IRR
C. 0 =-15400 + 7300/(1+IRR) + 9100/(1+IRR)^2 + 5900/(1+IRR)^3
D. 0 = (-15400 + 7300 + 9100 + 5900)/(1+IRR)^3
E. IRR =-15400 + 7300/(1+rocc) + 9100/(1+rocc)^2 + 5900/(1+rocc)^3


Q9:

Which confutation is closest to the IRR of the aftercited set of money flows? Hint: You can use: a) gauge and mistake, b) Excel, or c) a financial calculator to rerereexplain this bearing.

Year Cash Flow
0 -15,400
1 7,000
2 9,000
3 6,000

A. 20.7%
B. 12.4%
C. 28.7%
D. 6.2%
E. This doubt cannot be confutationed externally recognizeing the rocc for this purpose
F. -3.2%
G. 15.6%


Q10:


What is the IRR for this purpose? (Do not entire interjacent calculations and do not invade your confutation as a percent. Entire your confutation to 3 decimal establishs, e.g., 0.315 instead of 31.5%.)

EOY

Cash Flow

0


-10,000


3


13,000


Q11:

At what rocc would you be on the knife-edge betwixt confirming or throw-bying the over purpose? (Do not entire interjacent calculations and do not invade your confutation as a percent. Entire your confutation to 3 decimal establishs, e.g., 0.315 instead of 31.5%).


Q12:

A established evaluates all of its purposes by applying the IRR government. A purpose subordinate suspect has an IRR of 20%, and an rocc of 21%. The risk-free objurgate rrf is 12%. Should the established go onwards after a while this purpose? (Assume its OK to use the IRR government). Pick-out yes, no or not certain, then as-well pick-out one confutation providing your deduceing.

A. The IRR government says to consolid purposes after a while IRR > rrf.
B. Yes
C. The IRR government says to consolid merely purposes after a while IRR > rocc.
D. The IRR government says to throw-by merely purposes after a while IRR > rocc.
E. We can't parallel the BCR to the IRR.
F. The IRR government says to throw-by purposes after a while IRR > rrf.
G. No
H. We can't parallel the NPV to the IRR.
I. Not certain


Q13:

A purpose that supplys annual decisive money flows of $12000 for nine years absorbs $63,000 today. The highest decisive CF accomplish be current one year from now.

What is the NPV for the purpose if the rocc is 10.5 percent? Hint: you can do this bearing by operative, but its quicker to rerereexplain in Excel. (Do not entire interjacent calculations and entire your confutation to 2 decimal establishs, e.g., 32.16.)