Part 1. Capital Budgeting Practice Problemsa. Consider the project with the following expected cash flows:Year Cash flow0 -$400,0001 $100,0002 $120,0003 $850,000â¢If the discount rate is 0%, what is the project’s net present value?â¢If the discount rate is 2%, what is the project’s net present value?â¢If the discount rate is 6%, what is the project’s net present value?â¢If the discount rate is 11%, what is the project’s net present value?â¢With a cost of capital of 5%, what is this project’s modified internal rate of return?Now draw (for yourself) a chart where the discount rate is on the horizontal axis (the “x” axis) and the net present value on the vertical axis (the Y axis). Plot the net present value of the project as a function of the discount rate by dots for the four discount rates. connect the four points using a free hand ‘smooth’ curve. The curve intersects the horizontal line at a particular discount rate. What is this discount rate at which the graph intersects the horizontal axis?[ Look at the graph you draw and write a short paragraph stating what the graph ‘shows”]..b. Consider a project with the expected cash flows:Year Cash flow0 -$815,0001 $141,0002 $320,0003 $440,000â¢What is this project’s internal rate of return?â¢If the discount rate is 1%, what is this project’s net present value?â¢If the discount rate is 4%, what is this project’s net present value?â¢If the discount rate is 10%, what is this project’s net present value?â¢If the discount rate is 18%, what is this project’s net present value?Now draw (for yourself) a chart where the discount rate is on the horizontal axis (the “x” axis) and the net present value on the vertical axis (the Y axis). Plot the net present value of the project as a function of the discount rate by dots for the four discount rates. connect the four points using a free hand ‘smooth’ curve. The curve intersects the horizontal line at a particular discount rate. What is this discount rate at which the graph intersects the horizontal axis?[ Observe the graph and write a short paragraph stating what the graph ‘shows]c. A project requiring a $4.2 million investment has a profitability index of 0.94. What is its net present value? (Remember: Profitability Index is defined as Present Value of the proceeds divided by the initial investment)Part 2.Read the article below. Then write a one-to-two page paper answering the following question:Which method do you think is the better one for making capital budgeting decisions – IRR or NPV?Defend your answer with references to the background materials.Please read the following article which is available in Proquest:Internal rate of returnComputerworld. Framingham, Feb 17, 2003, Gary H Anthes.Abstract:Internal rate of return (IRR) is the flip side of net present value (NPV) and is based on the same principles and the same math. NPV shows the value of a stream of future cash flows discounted back to the present by some percentage that represents the minimum desired rate of return, often a company’s cost of capital. IRR, on the other hand, computes a break-even rate of return. It shows the discount rate below which an investment results in a positive NPV and above which an investment results in a negative NPV. It is the breakeven discount rate, the rate at which the value of cash outflows equals the value of cash inflows.
Our Service Charter
-
Excellent Quality / 100% Plagiarism-Free
We employ a number of measures to ensure top quality essays. The papers go through a system of quality control prior to delivery. We run plagiarism checks on each paper to ensure that they will be 100% plagiarism-free. So, only clean copies hit customers’ emails. We also never resell the papers completed by our writers. So, once it is checked using a plagiarism checker, the paper will be unique. Speaking of the academic writing standards, we will stick to the assignment brief given by the customer and assign the perfect writer. By saying “the perfect writer” we mean the one having an academic degree in the customer’s study field and positive feedback from other customers. -
Free Revisions
We keep the quality bar of all papers high. But in case you need some extra brilliance to the paper, here’s what to do. First of all, you can choose a top writer. It means that we will assign an expert with a degree in your subject. And secondly, you can rely on our editing services. Our editors will revise your papers, checking whether or not they comply with high standards of academic writing. In addition, editing entails adjusting content if it’s off the topic, adding more sources, refining the language style, and making sure the referencing style is followed. -
Confidentiality / 100% No Disclosure
We make sure that clients’ personal data remains confidential and is not exploited for any purposes beyond those related to our services. We only ask you to provide us with the information that is required to produce the paper according to your writing needs. Please note that the payment info is protected as well. Feel free to refer to the support team for more information about our payment methods. The fact that you used our service is kept secret due to the advanced security standards. So, you can be sure that no one will find out that you got a paper from our writing service. -
Money Back Guarantee
If the writer doesn’t address all the questions on your assignment brief or the delivered paper appears to be off the topic, you can ask for a refund. Or, if it is applicable, you can opt in for free revision within 14-30 days, depending on your paper’s length. The revision or refund request should be sent within 14 days after delivery. The customer gets 100% money-back in case they haven't downloaded the paper. All approved refunds will be returned to the customer’s credit card or Bonus Balance in a form of store credit. Take a note that we will send an extra compensation if the customers goes with a store credit. -
24/7 Customer Support
We have a support team working 24/7 ready to give your issue concerning the order their immediate attention. If you have any questions about the ordering process, communication with the writer, payment options, feel free to join live chat. Be sure to get a fast response. They can also give you the exact price quote, taking into account the timing, desired academic level of the paper, and the number of pages.