# 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.