400 - 600 words; 1+ page of calculations and 100 - 150 words
Details: The CEO has given you 3 different large projects he's evaluating to see which might be most beneficial to the company to invest in.

1). A new labor-saving piece of equipment that cost $200,000 and will reduce labor and quality costs by $40,000/year for 6 years. Calculate the following methods for this case
a. Simple payback: normal target for project approval is 2 years or less
b. Net present value (NPV): approval requires at least that NPV > 0
c. Internal rate of return (IRR): project approval requires that IRR at least exceed the firms minimum acceptable return, or hurdle rate, of 20%

2). A new marketing program, costing $1,000,000, which is expected to increase current sales of $10,000,000/year by 20% for the next 3 years only. The current contribution margin of 40% will remain in effect even with this sales increase. Calculate the following methods for this case
a. Simple payback: normal target for project approval is 2 years or less
b. Net present value (NPV): approval requires at least that NPV > 0
c. Internal rate of return (IRR): project approval requires that IRR at least exceed the firms minimum acceptable return, or hurdle rate, of 20%

3). Launching a new product will cost $700,000; the product is expected to sell for $60/unit at a volume of 10,000 units/year for 3 years, at a 50% contribution margin. Calculate the following methods for this case
a. Simple payback: normal target for project approval is 2 years or less
b. Net present value (NPV): approval requires at least that NPV > 0
c. Internal rate of return (IRR): project approval requires that IRR at least exceed the firms minimum acceptable return, or hurdle rate, of 20%

The firm's overall cost of capital is 15%.

Solution Summary

The solution deals with issues in finance: Internal rate of return, Net present value and payback period calculations.

Project SS costs $52,125, its expected net cash flows are $12,000 per year for 8 years, its WACC is 12%.
What is the project's NPV?
IRR?
MIRR?
Payback Period?
Discounted Payback Period?
(Show calculations)

(10-1)
NPV
A project has an initial cost of $40,000, expected net cash inflows of $9,000 per year for 7 years, and a cost of capital of 11%. What is the project's NPV (Hint: Begin by constructing a time line.)
(10-2)
IRR
Refer to Problem 10-1. What is the Project's IRR?
(10-3)
MIRR
Refer to Problem 10-1 What is t

1. "You say stock price equals the present value of future dividends? That's crazy! All the investors I know are looking for capital gains."
2.. "I like the IRR rule. I can use it to rank projects without having to specify a discount rate."
3. "I like the payback rule. As long as the minimum payback period is short, t

7. As the manager of exploration for Chieftain Oil & Gas, you are evaluating a new offshore oil recovery module that will recover oil and gas deep in the Gulf of Mexico. The expected cash flows are:
Initial investment $150 Million
Net cash flows years 1 to 5, $20M (Million), $60M, $90M, $60M, $30M, then well depleted, no s

I need help in understanding the cost of capital and how to figure it. Calculate the values for each project using the time value table- the cost of capital is 12%
1. NPV
2. IRR
3. Profitability index
4.Payback Period
Year Project A Project B
0 $-30,000 $-60,000
1 $ 10,000 $20,000
2 $ 10,000 $20,000
3 $ 10,000 $20,

Project A has an internal rate of return of 15 percent. Project B has an IRR of 14 percent. Both projects have a cost of capital of 12 percent. Which of the following statements is most correct?
a. Both projects have a positive netpresent value.
b. Project A must have a higher NPV than Project B.
c. If the cost of capit

Which of the following statements related to the internal rate of return (IRR) are correct?
I. The IRR method of analysis can be adapted to handle non-conventional cash flows.
II. The IRR that causes the netpresent value of the differences between two project's cash flows to equal zero is called the crossover rate.
III. T