Unit 6 Individual Assignment
You must upload an Excel spreadsheet for your assignment, with formulas showing all calculations. If you wish, you may submit, in addition, a Word document or PDF with accompanying text.
For this final unit, the assignment drills down from analyzing the company, as a whole, to analyzing specific initiatives.
Problem 1
A company has a 6.2% WACC and is considering two investments with the following net cash flows:
Yr 0 Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 Yr 6 Yr 7
Project A -$200 -$185 -$175 -$100 $200 $400 $600 -$100
Project B -$490 $131 $131 $131 $131 $131 $131 $0
a. What is each project’s NPV?
b. What is each project’s IRR?
c. If you had to choose one of these investments, which would you select, and why?
Problem 2
Cho-Sen Company is considering purchasing additional equipment that would have an initial cost of $500,000. They estimate it would add $250,000 to pre-tax revenues and $76,750 to pre-tax operating expense (before taking account of depreciation) per year, for the first 4 years. In Year 5, they will cease production, and therefore will have no additional revenues or operating costs, but will incur special shutdown costs of $50,000 (aside from depreciation).
The packaging machine will be depreciated on a straight-line basis, over 5 years, and will have no salvage value (ignore the MACRS depreciation methodology for this problem.)
Assuming a 18% marginal tax rate, and a 9.75% WACC, calculate the NPV of this investment.
Do you recommend this project? Why?
Good luck!
The post Unit 6 Individual Assignment You must upload an Excel spreadsheet for your appeared first on PapersSpot.
