Finance Mgmt

Feedback for problem #1

NPV = -$49,400 + $15,000[(1/I) – (1/(I x (1 + I)N))]   = -$49,400 + $15,000[(1/0.11) – (1/(0.11 x (1 + 0.11) 7 ))]   = $21,282.94 Financial calculator solution: Input CF0 = -49,400, CF1-7 = 15,000, I/YR = 11, and then solve for NPV = $21,282.94.

1. A project has an initial cost of $37,150, expected net cash inflows of $14,000 per year for 11 years, and a cost of capital of 10%. What is the project's NPV? (Hint: Begin by constructing a time line.) Do not round your intermediate calculations. Round your answer to the nearest cent.

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Feedback for problem #2

MIRR: PV Costs = $72,100 FV Inflows: PV       FV 0 1 2 8 9   11%   ...                 8,000 8,000 8,000 8,000           8,880.0000             ...             16,609.2812               18,436.3022     72,100   MIRR = 5.15%     113,311.7763           $72,100 = $113,311.7763/(1 + MIRR) 9 Financial calculator: Obtain the FVA by inputting N = 9, I/YR = 11, PV = 0, PMT = 8,000, and then solve for FV = $113,311.7763. The MIRR can be obtained by inputting N = 9, PV = -72,100, PMT = 0, FV = 113,311.7763, and then solving for I/YR = 5.15%

2. A project has an initial cost of $44,625, expected net cash inflows of $10,000 per year for 7 years, and a cost of capital of 14%. What is the project's MIRR? Do not round intermediate calculations. Round your answer to two decimal places.

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Feedback for problem #3

a. Equipment $14,000,000 Net operating working capital (NOWC) Investment 3,000,000 Initial investment outlay $17,000,000 b. c. No, last year's $150,000 expenditure is considered a sunk cost and does not represent an incremental cash flow. Hence, it should not be included in the analysis. d. The potential sale of the building represents an opportunity cost of conducting the project in that building. Therefore, the possible after-tax sale price must be charged against the project as a cost.

3. Talbot Industries is considering launching a new product. The new manufacturing equipment will cost $20 million, and production and sales will require an initial $5 million investment in net operating working capital. The company's tax rate is 40%.

a. What is the initial investment outlay? Write out your answer completely. For example, 2 million should be entered as 2,000,000. $

b. The company spent and expensed $150,000 on research related to the new project last year. Would this change your answer? (ignore 2nd drop down box with “item 2”

c. Rather than build a new manufacturing facility, the company plans to install the equipment in a building it owns but is not now using. The building could be sold for $1.5 million after taxes and real estate commissions. How would this affect your answer? The project's cost will  .(Ignore 2nd drop down box with item 3)

Item 2

Item 3