XERCISES FOR INVESTMENT APPRAISAL
INVESTMENT APPRAISAL
Exercise1:
Project K has a cost of $52,125, its expected net cash inflows are $12,000 per year for 8 years, and its cost of capital is 12%.
a. What is the project’s PP (time thu hồi dc vốn)?
b. What is the project’s DPP?
c. What is the project’s NPV?
d. What is the project’s IRR?
a) PP = 52,125/12,000 = 4.34
b) 52,125 – 12,000/1.12 – 12,000/1.12^2 – 12,000/1.12^3 – 12,000/1.12^4 – 12,000/1.12^5 – 12,000/1.12^6 = 2788
PV (7) = 12000/1.12^7 = 5428
DPP = 6 + 2788/5428 = 6.5 years
c) NPV = 12,000*[(1-1/(1+0.12)^8]/0.12 – 52,125 = 7486.7
d) 12,000 * [1-1/(1+IRR)^8]/IRR – 52,125 = 0 => IRR = 16%
Exercise 2:
You are a financial analyst for the Hittle Company, and the company is applying for a loan to support the upcoming project. The director of the capital budgeting has asked you analyze two proposed capital investment, Project X and Y. Each project has a cost of $10,000, and the cost of capital for each project is 12%. The project’s expected net cash flows are as follows:
Year
Project X
Project Y
0
(10,000)
(10,000)
1
6,500
3,500
2
3,000
3,500
3
3,000
3,500
4
1,000
3,500
a. Calculate each project’s PP, NPV, IRR.
b. Which of the project will be accepted if they are independent?
c. Which of the project will be accepted if they are mutually exclusive?
a) PP (x) = 2 (năm 2 đã gần hoàn vốn) + (10000-6500-3000)/3000(se tra trong năm 3 nên chỉ cần tính them thời gian hoàn vốn năm 3) = 2.17
PP (y) = 2 + (10000-3500-3500)/3500 = 2.86
NPV(x) = -10,000 + 6,500/(1+0.12) + 3000/(1+0.12)^2 + 3000/(1+0.12)^3+ 1000/(1+0.12)^4 = 966
NPV(y) = -10000 + 3,500/(1+0.12) + 3500/(1+0.12)^2 + 3500/(1+0.12)^3+ 3500/(1+0.12)^4 = 631
IRR (x) = 6,500/(1+IRR) + 3000/(1+IRR)^2 + 3000/(1+IRR)^3+ 1000/(1+IRR)^4 – 10000 = 0
IRR (x) = 18%
IRR (y) = 3,500/(1+IRR) + 3500/(1+IRR)^2 + 3500/(1+IRR)^3+ 3500/(1+IRR)^4 – 10000 = 0
IRR (y) = 15%
b) Vì independent nên chọn cả 2
c) Chọn X vì X sinh lợi cao hơn
Exercise 3:
Davis Ind.
Exercise1:
Project K has a cost of $52,125, its expected net cash inflows are $12,000 per year for 8 years, and its cost of capital is 12%.
a. What is the project’s PP (time thu hồi dc vốn)?
b. What is the project’s DPP?
c. What is the project’s NPV?
d. What is the project’s IRR?
a) PP = 52,125/12,000 = 4.34
b) 52,125 – 12,000/1.12 – 12,000/1.12^2 – 12,000/1.12^3 – 12,000/1.12^4 – 12,000/1.12^5 – 12,000/1.12^6 = 2788
PV (7) = 12000/1.12^7 = 5428
DPP = 6 + 2788/5428 = 6.5 years
c) NPV = 12,000*[(1-1/(1+0.12)^8]/0.12 – 52,125 = 7486.7
d) 12,000 * [1-1/(1+IRR)^8]/IRR – 52,125 = 0 => IRR = 16%
Exercise 2:
You are a financial analyst for the Hittle Company, and the company is applying for a loan to support the upcoming project. The director of the capital budgeting has asked you analyze two proposed capital investment, Project X and Y. Each project has a cost of $10,000, and the cost of capital for each project is 12%. The project’s expected net cash flows are as follows:
Year
Project X
Project Y
0
(10,000)
(10,000)
1
6,500
3,500
2
3,000
3,500
3
3,000
3,500
4
1,000
3,500
a. Calculate each project’s PP, NPV, IRR.
b. Which of the project will be accepted if they are independent?
c. Which of the project will be accepted if they are mutually exclusive?
a) PP (x) = 2 (năm 2 đã gần hoàn vốn) + (10000-6500-3000)/3000(se tra trong năm 3 nên chỉ cần tính them thời gian hoàn vốn năm 3) = 2.17
PP (y) = 2 + (10000-3500-3500)/3500 = 2.86
NPV(x) = -10,000 + 6,500/(1+0.12) + 3000/(1+0.12)^2 + 3000/(1+0.12)^3+ 1000/(1+0.12)^4 = 966
NPV(y) = -10000 + 3,500/(1+0.12) + 3500/(1+0.12)^2 + 3500/(1+0.12)^3+ 3500/(1+0.12)^4 = 631
IRR (x) = 6,500/(1+IRR) + 3000/(1+IRR)^2 + 3000/(1+IRR)^3+ 1000/(1+IRR)^4 – 10000 = 0
IRR (x) = 18%
IRR (y) = 3,500/(1+IRR) + 3500/(1+IRR)^2 + 3500/(1+IRR)^3+ 3500/(1+IRR)^4 – 10000 = 0
IRR (y) = 15%
b) Vì independent nên chọn cả 2
c) Chọn X vì X sinh lợi cao hơn
Exercise 3:
Davis Ind.