Problem Set #10
Question 1You are a financial analyst restraint the Waffle Company. The manager of chief budgeting has asked you to excite span proposed chief investments, Devices A and B. Each device has a consume of $50,000, and the consume of chief restraint each is 10%.The devices expected allure specie flows are as follows:
Expected Allure Specie Flows
Calculate each devices payback conclusion, allure give prize (NPV), interior objurgate of give-back (IRR), mitigated interior objurgate of give-back (MIRR), and profitability renunciation (PI).
Which device get you fine if your resolution was based singly on the devices payback conclusion?
Which device or devices should be current if they are recalcitrant?
Which device should be current if they are mutually unpopular?
d. How jurisdiction a substitute in the consume of chief result a contest betwixt the NPV and IRR rankings of these span devices? Would this contest stop if r were 6%? (Hint: Plot the NPV profiles.)
Marvin Industries must prefer betwixt an electric-powered and a coal-powered restraintklift tool restraint its factory. Because twain tools transact the selfselfsame employment, the sturdy get prefer barely individual. (They are mutually unpopular investments.) The electric-powered tool get consume further, save it get be close high-priced to operate; it get consume $102,000, inasmuch-as the coal-powered tool get consume $69,500. The consume of chief that applies to twain investments is 10%. The personality restraint twain images of tools is estimated to be 6 years, during which opportunity the allure specie flows restraint the electric-powered tool get be $26,150 per year, and those restraint the coal-powered tool get be $20,000 per year. Annual allure specie flows involve slander expenses.
Calculate the NPV and IRR restraint each image of tool, and flow which to recommend
Submit your answers in a Word and/or Excel instrument.
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