Problem 3

Project A Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Total
Required 20%
Outflows -$50,000.00 -$50,000.00
Inflows $15,000.00 $25,000.00 $30,000.00 $20,000.00 $15,000.00
Discounted Cash Flow $12,500.00 $17,361.11 $17,361.11 $9,645.06 $6,028.16 $62,895.45
NPV $12,895.45 $12,895.45

000.000.087.00 Outflow -$300.00 $0.00 $0.000.00 -$505.000.00 $197.00 Netflow -$225.00 -$100.000.00 $0.000.00 $90.00 $150.000.000.00 -$50.00 $1.000.000.00 $250.000.000.00 NPV $76.00 $120.00 -$530.00 $180.000.000.00 $582.000. because the calculation shown above show a higher Net Present Value for the second project.00 $215.00 NPV $129.00 $0.00 $150.000.00 $150.00 $70.000.00 -$30.000.00 -$30.00 $175.000.00 $200.000.000.00 -$190.000.000.Problem 4 Project A Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Total Required + Inflation 21% Inflows $0.00 $150.00 $1.00 $197.19 ==> I would fund the second project.000.000.000.00 -$30.00 $250.000. Alpha.00 $0.000.00 -$30.00 $190.00 $180.000.000.000.000.00 -$50.000.649.00 -$50.000. .00 Outflow -$225.89 Project B Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Total Required + Inflation 21% Inflows $0.000.000.00 $215.000.00 $205.000.00 $250.000.536.000.00 $670.00 $50.000.00 $100.000.00 Netflow -$300.000.000.00 $150.200.00 $0.00 -$190.00 $220.000.00 $200.00 $0.

00 $25.000.000.00 $75.00 -$200.00 $230.000.000.000.000. Order: Tonight's the Night.00 $10.000.00 $15.000.00 Revenue $200.000.74 Project: Tonight's the Night Required + Inflation 22% Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Total Investment -$200.00 $10.00 Netflow -$600.000.000.000.00 Netflow -$400.000.00 $10.00 Revenue $400.00 $120.321.000.000.00 $20.000.00 Revenue $600.000.00 $555.00 $720.00 Netflow -$200.000.000.000.00 $10.00 $25.00 $100.000.00 $75.000. Time Fades Away .000.00 $10.00 $100.000..000.000.000.000.000.92 Project: On the Beach Required + Inflation 22% Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Total Investment -$400.00 $20.00 $400. On the Beach.000.00 NPV = $101.00 $75.000.948.00 -$600.22 => Project: Tonight's the Night should be Broken Arrow's first priority because it has the highest NPV/ greatest return on investment.000.00 $430.00 NPV = $21.000.000.00 $20.00 $20.000.000.000.00 $125.000.000.00 $600.000.00 $20.000.000.00 NPV = -$36.00 $20.00 $125. but do not fund the first project.Problem 6 Project: Time Fades Away Required + Inflation 22% Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Total Investment -$600.000.00 $155.00 $200. Project: On the Beach should also be funded because it has a positive NPV.000.00 $75.550.000.00 $10.00 $15.00 -$400.

Problem 7 a.)If the rates don't accuratley reflect critical strategic factors then you could easily select the wrong project and lose money Weighted Total Project 2 5 4 3 1 3 1 9 5 2 0 2 5 68 2 3 7 2 0 5 1 57 3 6 8 2 3 6 8 99 4 1 0 5 10 6 9 85 5 3 10 10 1 8 0 107 Weighted Total Project 5 5 4 3 1 3 1 9 5 2 0 2 5 95 2 3 7 2 0 5 1 66 3 6 8 2 3 6 8 117 4 1 0 5 10 6 9 88 5 3 10 10 1 8 0 116 .) Yes. The top 3 are project 3-5-1 c.) Highest: Project 5 Lowest: Project 1 b. Project 3 is now the highest.

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