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Fin 515 Week 5 Assignment

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Submitted By bhayden415
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FIN 515 Week 5 Homework
10-8
Truck:
(=NVP: 14%, 5100, 5100, 5100, 5100, 5100) = $17,508.71 - $17,100 = $408.71
(=IRR: -17100, 5100, 5100, 5100, 5100, 5100) = 14.99%
(=MIRR: -17100, 5100, 5100, 5100, 5100, 5100, 14%, 14%) = 14.54%
→ Accept the decision.
Pulley System:
(=NPV: 14%, 7500, 7500, 7500, 7500, 7500) = $25,748.11 – $22,430 = $3,318.11
(=IRR: -22430, 7500, 7500, 7500, 7500, 7500) = 19.99% → 20%
(=MIRR: -22430, 7500, 7500, 7500, 7500, 7500, 14%, 14%) = 17.19%
→ Accept the decision.
10-9
Electric Truck:
(=NPV: 12%, 6290, 6290, 6290, 6290, 6290, 6290) = $25,860 - $22,000 = $3,860
(=IRR: -22000, 6290, 6290, 6290, 6290, 6290, 6290) = 17.99% → 18%
Gas Truck:
(=NPV: 12%, 5000, 5000, 5000, 5000, 5000, 5000) = $20,557 - $17,500 = $3,057
(IRR= -17500, 5000, 5000, 5000, 5000, 5000, 5000) = 17.97% → 18% → Choose the electric truck, since it has the higher NPV & the IRR for both trucks are the same.

11-2 Operating Cash Flow = NOPAT + Depreciation → NOPAT = EBIT (1-Tax Rate) NOPAT: $10,000,000 [Projected Sales] - $7,000,000 [Operating Costs] - $2,000,000 [Interest Expense] $1,000,000 (1-0.40) → $1,000,000 (0.60) = $600,000 Operating Cash Flow = NOPAT + Depreciation $600,000 [NOPAT] + $2,000,000 [Depreciation] $2,600,000 [Operating Cash Flow] 11-3 $20,000,000 with a depreciation of 80% = $4,000,000 Value $5,000,000 [Gross Sale] - $4,000,000 [Value] $1,000,000 [Profit] 40% Tax on $1,000,000 → $400,000 $5,000,000 [Gross Sale] - $400,000 [Tax on Profit] $4,600,000 [After-Tax Net Salvage

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