# 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

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

\$218.68

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:

\$83

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%.

\$4,810

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?

\$6,004

********#6.      What is the IRR of the above project?

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