Hello!
From what you posted here, you answered correctly questions 1 and 3, but question 2 is incorrect.
The mistake was to discount (convert into equivalent constant dollars) the cash flows from year 2 and year 3 without taking in account the inflation for previous years. For example, you said that the discounted value of $26,000 in year 3 is:
26000 * (1.081)^(-3)
You're ...
Solution Summary
Project cash flow analysis for after-tax projects are determined. The expected annual general inflaction rate during the project period is examined.
... This would tend to reinforce the decision to (Accept or Reject) Project B. If Project B's cash flows were negatively ... YES or NO? Scenario Analysis. ...
... According to incremental analysis only the ... replacement projects, incremental cash flows are calculated by subtracting existing project cash flows from those ...
... 13. The final two mutually exclusive projects that Caledonia is considering involve ... provide the following set of after-tax net cash flows: Year Equipment ...
... can these estimates be incorporated into the analysis so as ... Calculate the initial outlay for this replacement project. 5. How are the interim cash flows to be ...
... 2. An analysis of the cash flows that include the main analysis measures such as ... Schedule: Initial Investment $200,000 Year Life of the project 5 years ...
... Part 5. Key Output: Appraisal of the Proposed Project. ... Years 0 1 2 3 4 Net cash flow Cumulative CF 0 Part ... b. Now conduct a sensitivity analysis to determine the ...
... a replacement rather than an expansion project, how would the analysis have changed? Think about the changes that would have to occur in the cash flow table. ...
... it is recommended to selected Project B ... The analysis involves the choice between two mutually ... that yield different operating efficiencies that affect cash flow. ...
