Harry Davis Inc is considering the following projects: Year Project 1 Project 2 Project 3 Project 4 0 ...

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Finance

Harry Davis Inc is considering the following projects:
Year   Project 1   Project 2  Project 3   Project 4
0   $(50,000,000)   $(25,000,000)  $(25,000,000)   $(50,000,000)
1   $15,000,000    $10,000,000   $5,000,000    $22,000,000
2   $15,000,000    $15,000,000   $10,000,000    $17,000,000
3   $15,000,000    $17,000,000   $5,000,000    $13,500,000
4   $15,000,000    $25,000,000   $11,000,000    $10,000,000
5   $15,000,000    $(35,000,000)  $10,000,000    $8,000,000
The company has a weighted average cost of capital of 11.20%(this is the firm’s required return).
Calculate the Net Present Value (NPV) of each project.
Calculate the Internal Rate of Return (IRR) of eachproject.
Calculate the Payback Period for each project. (Harry Davisrequires all new projects have a payback period of 4 years orless)
If these four projects are independent, which one(s) should beaccepted? Why?
If these four projects are mutually exclusive, which one(s)should be accepted? Why?

Answer & Explanation Solved by verified expert

3.6 Ratings (603 Votes)

1Project 1 Net present value is solved using a financial calculator The steps to solve on the financial calculator Press the CF button CF0 50000000 It is entered with a negative sign since it is a cash outflow Cash flow for all the years should be entered Press Enter and down arrow after inputting each cash flow After entering the last cash flow press the NPV button and enter the weighted average cost of capital of 1120 Press the down arrow and CPT buttons to get the net present value Net Present value of cash flows at 1120 the weighted average cost of capital is 516066543 Project 2 Net present value is solved using a financial calculator The steps to solve on the financial calculator Press the CF button CF0 25000000 It is entered with a negative sign since it is a cash outflow Cash flow for all the years should be entered Press Enter and down arrow after inputting each cash flow After entering the last cash flow press See Answer

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Harry Davis Inc is considering the following projects:Year Project 1 Project 2 Project 3 Project 40 $(50,000,000) $(25,000,000) $(25,000,000) $(50,000,000)1 $15,000,000 $10,000,000 $5,000,000 $22,000,0002 $15,000,000 $15,000,000 $10,000,000 $17,000,0003 $15,000,000 $17,000,000 $5,000,000 $13,500,0004 $15,000,000 $25,000,000 $11,000,000 $10,000,0005 $15,000,000 $(35,000,000) $10,000,000 $8,000,000The company has a weighted average cost of capital of 11.20%(this is the firm’s required return).Calculate the Net Present Value (NPV) of each project.Calculate the Internal Rate of Return (IRR) of eachproject.Calculate the Payback Period for each project. (Harry Davisrequires all new projects have a payback period of 4 years orless)If these four projects are independent, which one(s) should beaccepted? Why?If these four projects are mutually exclusive, which one(s)should be accepted? Why?