finance simple assignment. Need 100% correct answers though
iamnickok
week_4_homework.docx
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Year |
Cash Flow (A) |
Cash Flow (B) |
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0 |
−$55,000 |
−$ 95,000 |
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1 |
19,000 |
18,000 |
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2 |
27,000 |
26,000 |
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3 |
24,000 |
28,000 |
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4 |
9,000 |
260,000 |
4. Calculating AAR. You’re trying to determine whether or not to expand your business by building a new manufacturing plant. The plant has an installation cost of $14 million, which will be depreciated straight-line to zero over its four-year life. If the plant has projected net income of $1,253,000, $1,935,000, $1,738,000, and $1,310,000 over these four years, what is the project’s average accounting return (AAR)?
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5. Calculating IRR. A firm evaluates all of its projects by applying the IRR rule. If the required return is 11 percent, should the firm accept the following project? |
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Year |
Cash Flow |
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0 |
−$153,000 |
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1 |
78,000 |
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2 |
67,000 |
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3 |
49,000 |
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6. |
Calculating NPV. For the cash flows in the previous problem, suppose the firm uses the NPV decision rule. At a required return of 9 percent, should the firm accept this project? What if the required return was 21 percent? |
