Homework 2 – Project Evaluation – Advanced Corporate Finance Question 1: The purpose of this question is to evaluate a proposed project. This project has the following cash flows: Year 0 1 2 3 4 5 6...

1 answer below »

View more »
Answered Same DaySep 15, 2021

Answer To: Homework 2 – Project Evaluation – Advanced Corporate Finance Question 1: The purpose of this...

Mohammad Wasif answered on Sep 17 2021
143 Votes
Solution 1
a)
    Rate of Reinvest
    15%
     
     
    Rate of Discount
    12%
     
     
    Year
    Cashflow (in M)
    PV @ 12%
    Present Value
    0
     $ (1,000)
    1.0000
     $ (1,000.0000)
    1
     $ 250
    0.8929
     $ 223.
2143
    2
     $ 350
    0.7972
     $ 279.0179
    3
     $ 400
    0.7118
     $ 284.7121
    4
     $ 520
    0.6355
     $ 330.4694
    5
     $ 600
    0.5674
     $ 340.4561
    6
     $ (800)
    0.5066
     $ (405.3049)
    NPV
     
     
     $ 52.56
b)
    Year
    Cashflow (in M)
    0
     $ (1,000)
    1
     $ 250
    2
     $ 350
    3
     $ 400
    4
     $ 520
    5
     $ 600
    6
     $ (800)
    IRR
    14.72%
c)
    Rate of Reinvest
    15%
    Rate of Discount
    12%
    Year
    Cashflow (in M)
    0
     $ (1,000)
    1
     $ 250
    2
     $ 350
    3
     $ 400
    4
     $ 520
    5
     $ 600
    6
     $ (800)
    MIRR
    14.10%
Solution 2
a)
    Cost of Capital
    12%
     
     
     
     
    Year
    Cashflow (M)
    PV @ 12%
    Present Value
     
    Gas
    Parking
     
    Gas
    Parking
    0
     $ (1,200)
     $ (3,500)
    1.0000
     $ (1,200.00)
     $ (3,500.00)
    1
     $ 470
     $ 1,200
    0.8929
     $ 419.64
     $ 1,071.43
    2
     $ 470
     $ 1,200
    0.7972
     $ 374.68
     $ 956.63
    3
     $ 470
     $ 1,200
    0.7118
     $ 334.54
     $ 854.14
    4
     $ 470
     $ 1,200
    0.6355
     $ 298.69
     $ 762.62
    5
     $ 470
     $ 1,200
    0.5674
     $ 266.69
     $ 680.91
    NPV
     
     
     
     $ 494.24
     $ 825.73
b)
    Year
    Cashflow (M)
     
    Gas
    Parking
    0
     $ (1,200)
     $ (3,500)
    1
     $ 470
     $ 1,200
    2
     $ 470
     $ 1,200
    3
     $ 470
     $ 1,200
    4
     $ 470
     $ 1,200
    5
     $ 470
     $ 1,200
    IRR
    28%
    21%
c) In part (a), on the basis of NPV, the project “Parking” has the highest value as compared to project “Gas”. Therefore,...
SOLUTION.PDF

Answer To This Question Is Available To Download

Related Questions & Answers

More Questions »

Submit New Assignment

Copy and Paste Your Assignment Here
April
January
February
March
April
May
June
July
August
September
October
November
December
2025
2025
2026
2027
SunMonTueWedThuFriSat
30
31
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
1
2
3
00:00
00:30
01:00
01:30
02:00
02:30
03:00
03:30
04:00
04:30
05:00
05:30
06:00
06:30
07:00
07:30
08:00
08:30
09:00
09:30
10:00
10:30
11:00
11:30
12:00
12:30
13:00
13:30
14:00
14:30
15:00
15:30
16:00
16:30
17:00
17:30
18:00
18:30
19:00
19:30
20:00
20:30
21:00
21:30
22:00
22:30
23:00
23:30