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1、CorporateFinanceAssignment3Assignment3Duedate:5December2011,MondayPleasewritelegiblyandshowallthesteps.1.Youareanalyzingaproposedprojectandhavecompiledthefollowinginformation.YearCashFlow0-$135,0001$28,6002$65,5003$71,900Requiredreturn:8.50percent1)Whatisthenet
2、presentvalueoftheproposedproject?Shoulditbeacceptedaccordingtothiscriterion?2)Whatistheinternalrateofreturn(IRR)ofthisproject?Shoulditbeacceptedaccordingtothiscriterion?3)Whatistheprofitabilityindex(PI)ofthisproject?Shoulditbeacceptedaccordingtothiscriterion?2.
3、TheWinstonCo.isconsideringtwomutuallyexclusiveprojectswiththefollowingcashflows.Whatisthecrossoverrate?Statewhichofthetwoprojectsispreferreddependingontherequiredreturn,i.e.statetheregionsonthediscountrateaxisinwhichProjectAispreferredandinwhichProjectBisprefer
4、red.ProjectAProjectBYearCashFlowCashFlow0-$75,000-$60,0001$30,000$25,0002$35,000$30,0003$35,000$25,0003.Kurt’sKabinetsislookingataprojectthatwillrequire$80,000infixedassetsandanother$20,000innetworkingcapital.Theprojectisexpectedtoproducesalesof$110,000withasso
5、ciatedcostsof$70,000.Theprojecthasa4-yearlife.Thecompanyusesstraight-linedepreciationtoazerobookvalueoverthelifeoftheproject.Thetaxrateis35percent.Whatistheoperatingcashflowforthisproject?4.ThornleyMachinesisconsideringa3-yearprojectwithaninitialcostof$618,000.
6、Theprojectwillnotdirectlyproduceanysalesbutwillreduceoperatingcostsby$265,000ayear.Theequipmentisdepreciatedstraight-linetozerobookvalueoverthelifeoftheproject.Attheendoftheprojecttheequipmentwillbesoldforanestimated$60,000.Thetaxrateis34percent.Theprojectwillr
7、equire$23,000inextrainventoryforsparepartsandaccessories.1CorporateFinanceAssignment3ShouldthisprojectbeimplementedifThornleyrequiresa9percentrateofreturn?Whyorwhynot?1.Youareworkingonabidtobuildfourcabinsayearforthenextthreeyearsforalocalcampground.Thisproject
8、requiresthepurchaseof$66,000ofequipmentwhichwillbedepreciatedusingstraight-linedepreciationtoazerobookvalueoverthethreeyears.Theequipmentcanbesoldattheendoftheprojectfor$40,
