I JUST NEED HELP WITH NUMBER 6
CAPITAL BUDGETING PROBLEMS
1. What is the net present value of a project that has an initial cash outflow of $12,670 and the following cash inflows? The required return is 11.5percent. CF1=$4,735 CF2=$0 CF3=$8,750 and CF4=$4,100
2. An investment has the following cash flows. Should the project be accepted if it has been assigned a required return of 9.5 percent. Why or why not? CF0=-24,000 CF1=8,000 CF2= 12,000 CF3= 9,000
Yes, because the IRR exceed the required return by about 0.39 percent
3. Consider a $10,000 machine that will reduce pretax operating costs by $3,000 per year over a 5-year period. Assume no changes in net working capital and a salvage value of zero. Further assume straight-line depreciation to zero, a marginal tax rate of 34% and a required return of 10%. The project NPV is:
4. You Purchase a machine for $10,000 depreciated straight line over its 4-year life. If the machine is sold at the end of the third year for $6,000 what are the after-tax proceeds from the sale, assuming your tax rate is 34%.
5. A projects costs $21,000 will be depreciated straight-line to zero over its 3 year life, and will require a net working capital investment of $5,000 up front. The project generates operating income $13,000. The asset will be sold for $2,000 at this end of the project. If the firm has a tax rate of 34% and a required return of 10% what is the project NPV?
********#6. What is the IRR of the above project?