1)

Years 0 1 2 3 4 5 6 7
Money Flow -35000 5000 5000 5000 5000 5000 5000 5000

[A] IRR 11.4913%

COC 12%
NPV -945.67755267
No it should not

[B]
Years 0 1 2 3
-35000 4500 4500 4500

IRR 0.12857142857 12.86%

yes it should

[C]
31250 50000
NPV -3750 npv 15000 irr

No

2)
Add a new window
-75000 44000 44000 44000
IRR 35%
Disc Rate 15%
NPV 25461.91

Update existing eqipment

-50000 23000 23000 23000
IRR 18%
Disc Rate 15%
NPV 2514.178

Build a new stand

-125000 70000 70000 70000
IRR 31%
Disc Rate 15%
NPV 34825.76

Rent a larger Stand

-1000 12000 13000 14000
IRR 1208%
Disc Rate 15%
NPV 28469.88

3)
-1000000 371739 371739 371739 371739

[A] Subsidize the project to irr = 25%

371739*PVIFA(25%,4) 877304
-122696

[B] 743478
Shortfall -256522 pay this amt at End of 2 yrs 962804

[C] -112666

[D] 0.243478

subsidy 78261*4 at the end of 4 yrs 150966.4

ans is C

Syllabus
Working capital
discount
take discount or not
Cap budgeting cases
quest are open ended
Bullet points
Comment + Calculate type of quest
Butler lumber case is imp for next class
 8 9 10 11 12 13 14 15
5000 5000 5000 5000 5000 5000 5000 5000

n
4500

15.43