Assignment: Tuttle Enterprises Help Online by Expert Writers
1. Tuttle Enterprises is considering a project that has the following cash flow and WACC data. What is the project’s NPV? Note that if a project’s projected NPV is negative, it should be rejected.
| WACC: | 11.00% | ||||
| Year | 0 | 1 | 2 | 3 | 4 |
| Cash flows | −$1,000 | $350 | $350 | $350 | $350 |
| $77.49 | |||||
| $81.56 | |||||
| $85.86 | |||||
| $90.15 | |||||
| $94.66 |
5 points
QUESTION 2
1. Harry’s Inc. is considering a project that has the following cash flow and WACC data. What is the project’s NPV? Note that if a project’s projected NPV is negative, it should be rejected.
| WACC: | 10.25% | |||||
| Year | 0 | 1 | 2 | 3 | 4 | 5 |
| Cash flows | −$1,000 | $300 | $300 | $300 | $300 | $300 |
| $105.89 | ||||||
| $111.47 | ||||||
| $117.33 | ||||||
| $123.51 | ||||||
| $130.01 |
5 points
QUESTION 3
1. Warr Company is considering a project that has the following cash flow data. What is the project’s IRR? Note that a project’s projected IRR can be less than the WACC or negative, in both cases it will be rejected.
| Year | 0 | 1 | 2 | 3 | 4 |
| Cash flows | −$1,050 | $400 | $400 | $400 | $400 |
| 14.05% | |||||
| 15.61% | |||||
| 17.34% | |||||
| 19.27% | |||||
| 21.20% |
5 points
QUESTION 4
1. Mansi Inc. is considering a project that has the following cash flow data. What is the project’s payback?
| Year | 0 | 1 | 2 | 3 |
| Cash flows | −$750 | $300 | $325 | $350 |
| 1.91 years | ||||
| 2.12 years | ||||
| 2.36 years | ||||
| 2.59 years | ||||
| 2.85 years |
5 points
QUESTION 5
1. Warnock Inc. is considering a project that has the following cash flow and WACC data. What is the project’s NPV? Note that a project’s projected NPV can be negative, in which case it will be rejected.
| WACC: | 10.00% | |||
| Year | 0 | 1 | 2 | 3 |
| Cash flows | −$950 | $500 | $400 | $300 |
| $54.62 | ||||
| $57.49 | ||||
| $60.52 | ||||
| $63.54 | ||||
| $66.72 |
5 points
QUESTION 6
1. Barry Company is considering a project that has the following cash flow and WACC data. What is the project’s NPV? Note that a project’s projected NPV can be negative, in which case it will be rejected.
| WACC: | 12.00% | |||||
| Year | 0 | 1 | 2 | 3 | 4 | 5 |
| Cash flows | −$1,100 | $400 | $390 | $380 | $370 | $360 |
| $250.15 | ||||||
| $277.94 | ||||||
| $305.73 | ||||||
| $336.31 | ||||||
| $369.94 |
5 points
QUESTION 7
1. Ehrmann Data Systems is considering a project that has the following cash flow and WACC data. What is the project’s MIRR? Note that a project’s projected MIRR can be less than the WACC (and even negative), in which case it will be rejected.
| WACC: | 10.00% | |||
| Year | 0 | 1 | 2 | 3 |
| Cash flows | −$1,000 | $450 | $450 | $450 |
| 9.32% | ||||
| 10.35% | ||||
| 11.50% | ||||
| 12.78% | ||||
| 14.20% |
5 points
QUESTION 8
1. Malholtra Inc. is considering a project that has the following cash flow and WACC data. What is the project’s MIRR? Note that a project’s projected MIRR can be less than the WACC (and even negative), in which case it will be rejected.
| WACC: | 10.00% | ||||
| Year | 0 | 1 | 2 | 3 | 4 |
| Cash flows | −$850 | $300 | $320 | $340 | $360 |
| 14.08% | |||||
| 15.65% | |||||
| 17.21% | |||||
| 18.94% | |||||
| 20.83% |
5 points
QUESTION 9
1. Fernando Designs is considering a project that has the following cash flow and WACC data. What is the project’s discounted payback?
| WACC: | 10.00% | |||
| Year | 0 | 1 | 2 | 3 |
| Cash flows | −$900 | $500 | $500 | $500 |
| 1.88 years | ||||
| 2.09 years | ||||
| 2.29 years | ||||
| 2.52 years | ||||
| 2.78 years |
5 points
QUESTION 10
1. A firm is considering Projects S and L, whose cash flows are shown below. These projects are mutually exclusive, equally risky, and not repeatable. The CEO wants to use the IRR criterion, while the CFO favors the NPV method. You were hired to advise the firm on the best procedure. If the wrong decision criterion is used, how much potential value would the firm lose?
| WACC: | 6.00% | ||||
| Year | 0 | 1 | 2 | 3 | 4 |
| CFS | −$1,025 | $380 | $380 | $380 | $380 |
| CFL | −$2,150 | $765 | $765 | $765 | $765 |
| $188.68 | |||||
| $198.61 | |||||
| $209.07 | |||||
| $219.52 | |||||
| $230.49 |
5 points
QUESTION 11
1. TexMex Food Company is considering a new salsa whose data are shown below. The equipment to be used would be depreciated by the straight-line method over its 3-year life and would have a zero salvage value, and no change in net operating working capital would be required. Revenues and other operating costs are expected to be constant over the project’s 3-year life. However, this project would compete with other TexMex products and would reduce their pre-tax annual cash flows. What is the project’s NPV? (Hint: Cash flows are constant in Years 1-3.)
| WACC | 10.0% |
| Pre-tax cash flow reduction for other products (cannibalization) | −$5,000 |
| Investment cost (depreciable basis) | $80,000 |
| Straight-line depreciation rate | 33.333% |
| Annual sales revenues | $67,500 |
| Annual operating costs (excl. depreciation) | −$25,000 |
| Tax rate |
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