Purchase Solution

Salt at Pear Computer Services: NPV, IRR and Project Evaluation

Not what you're looking for?

Ask Custom Question

I need help with the following questions based on the details given in the attached file:

1. Salt has requested that all quantifiable data, upon which he will base his choice of project, be compiled and presented to him. The data needed are shown in the following table.
Complete the missing entries for project C.

2. Comment upon the relative riskiness of projects.

3. Determine the expected net present value of each project assuming that a 12% cost of capital is appropriate for Pear Computer Services.

4. Calculate the internal rate of return on each project based upon expected values of the inflows and outflows.

5. With the expected net cash flow patterns, could the net present value (NPV) and the internal rate of return (IRR) result in conflicting rankings of project choice?

6. Assume that Salt instructs you to use different risk-adjusted discount rates for each project, and that he suggests that 10% is reasonable for project A, 12% for B and 24% for C.
Calculate the risk-adjusted net present values for each project. Do conflicting rankings in terms of the risk-adjusted NPV and IRR occur? If so, why?

7. Which of the projects, if any, do you think Salt should accept:
(a) If he operates strictly with the shareholders' interest in mind,
and
(b) considering his personal situation?

Purchase this Solution

Solution Summary

This solution shows step-by-step calculations in an Excel file to determine the NPV, IRR and provide an evaluation of the project and whether if Salt should accept the proposal.

Solution provided by:
Education
  • MBA, Indian Institute of Finance
  • Bsc, Madras University
Recent Feedback
  • "I've posted a similar question for another course. It's post 657940, and it's a practice problem that I'd like to use for the final exam. Your help will be greatly appreciated. "
  • "thank you!"
  • "Thank you again Jayant. You are super fast. "
  • "Thank you Jayant. You are appreciated. "
  • "Again, thank you Jayant. You are wonderful. "
Purchase this Solution


Free BrainMass Quizzes
Writing Business Plans

This quiz will test your understanding of how to write good business plans, the usual components of a good plan, purposes, terms, and writing style tips.

Operations Management

This quiz tests a student's knowledge about Operations Management

MS Word 2010-Tricky Features

These questions are based on features of the previous word versions that were easy to figure out, but now seem more hidden to me.

Marketing Management Philosophies Quiz

A test on how well a student understands the basic assumptions of marketers on buyers that will form a basis of their marketing strategies.

Motivation

This tests some key elements of major motivation theories.