# Chapter 09 Problems Fundamental Of Corporate Finance

Chapter 09 Problems Fundamental Of Corporate Finance

ORDER A PLAGIARISM FREE PAPER NOW

Don't use plagiarized sources. Get Your Custom Essay on
Chapter 09 Problems Fundamental Of Corporate Finance
Just from \$15/Page
 Buy Coastal, Inc., imposes a payback cutoff of three years for its international investment projects.

 Year Cash Flow (A) Cash Flow (B) 0 –\$ 53,000 –\$ 63,000 1 19,500 11,500 2 21,000 14,500 3 17,500 19,000 4 4,500 223,000

 What is the payback period for both projects? (Round your answers to 2 decimal places. (e.g., 32.16))

 Payback period Project A years Project B years

Which project should the company accept?

 Project B Project A

 An investment project costs \$10,000 and has annual cash flows of \$2,950 for six years.

 What is the discounted payback period if the discount rate is zero percent? (Enter 0 if the project never pays back. Round your answer to 2 decimal places. (e.g., 32.16))

 Discounted payback period years

 What is the discounted payback period if the discount rate is 4 percent? (Enter 0 if the project never pays back. Round your answer to 2 decimal places. (e.g., 32.16))

 Discounted payback period years

 What is the discounted payback period if the discount rate is 21 percent? (Enter 0 if the project never pays back. Round your answer to 2 decimal places. (e.g., 32.16))

 Discounted payback period years

 A project that provides annual cash flows of \$16,600 for eight years costs \$72,000 today.

 What is the NPV for the project if the required return is 7 percent? (Round your answer to 2 decimal places. (e.g., 32.16))

 NPV \$

At a required return of 7 percent, should the firm accept this project?

 Accept Reject

 What is the NPV for the project if the required return is 19 percent? (Negative amount should be indicated by a minus sign. Round your answer to 2 decimal places. (e.g., 32.16))

 NPV \$

At a required return of 19 percent, should the firm accept this project?

 Accept Reject

 At what discount rate would you be indifferent between accepting the project and rejecting it? (Round your answer to 2 decimal places. (e.g., 32.16))

 Discount rate %

 Garage, Inc., has identified the following two mutually exclusive projects:

 Year Cash Flow (A) Cash Flow (B) 0 –\$ 29,200 –\$ 29,200 1 14,600 4,400 2 12,500 9,900 3 9,300 15,400 4 5,200 17,000

 a-1 What is the IRR for each of these projects? (Do not round intermediate calculations and round your final answers to 2 decimal places. (e.g., 32.16))

 IRR Project A % Project B %

a-2 Using the IRR decision rule, which project should the company accept?

 Project A Project B

a-3 Is this decision necessarily correct?

 Yes No

 b-1 If the required return is 10 percent, what is the NPV for each of these projects? (Do not round intermediate calculations and round your final answers to 2 decimal places. (e.g., 32.16))

 NPV Project A \$ Project B \$

b-2 Which project will the company choose if it applies the NPV decision rule?

 Project A Project B

 c. At what discount rate would the company be indifferent between these two projects? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

 Discount rate %

 Slow Ride Corp. is evaluating a project with the following cash flows:

 Year Cash Flow 0 –\$ 29,900 1 12,100 2 14,800 3 16,700 4 13,800 5 – 10,300

 The company uses an interest rate of 10 percent on all of its projects.

 Calculate the MIRR of the project using the discounting approach method. (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

 MIRR %

 Calculate the MIRR of the project using the reinvestment approach method. (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

 MIRR %

 Calculate the MIRR of the project using the combination approach method. (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

 MIRR %