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 ...
... 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 ...
... and payback using our base case cash flows and the ... if the coefficient of variation for the project is less ... Based upon this analysis, would you recommend that ...
... Should this be considered in the analysis? ... b. 1) Construct incremental operating cash flow statements for the project's 4 years of operations. ...
... and their costs, including the project's weighted average ... even point c. Pro forma cash flow statement d. Pro ... balance sheet e. A sensitivity analysis for your ...
... the project. Once you had the net cash flow values, you would calculate the NPV, IRR, MIRR, and payback as you did previously. (Note that sensitivity analysis...
... The analysis indicated that the expected cash flows from the ... were subject to considerably more uncertainty than those from the strip mining project. ...
