BUS FPX 3062 Assessment 5 Capital Budgeting
Phillip February 27, 2024 No Comments

BUS FPX 3062 Assessment 5 Capital Budgeting

BUS FPX 3062 Assessment 5 Capital Budgeting

Name

Capella university

BUS-FPX3062 Fundamentals of Finance

Prof. Name

Date

Table 1: Capital Budgeting Analysis

Problem

Description

Calculation

Interpretation

1 Compute the NPV statistic for Project Y. Decide whether to accept or reject the project with a 10% cost of capital. NPV = -$139.18 With a negative NPV, the project should be rejected.
2 Compute the payback period statistic for Project X and recommend acceptance or rejection with a maximum payback of four years. Payback period = 3.2 years Since the payback period is less than 4 years, the project can be accepted.
3 Two mutually exclusive projects, A and B, have projected cash flows. Compute NPV and IRR for both projects with a 10% cost of capital. NPV(A) = $8,391.86 NPV(B) = $10,710.61 IRR(A) = 16.99% IRR(B) = 14.75% Project B has a higher NPV and Project A has a higher IRR, indicating differing preferences based on the criterion.
4 Calculate the IRR and NPV for a project with an initial cost of $1,000 and cash inflows of $300 annually for 5 years, with a 12% cost of capital. IRR = 15% NPV = $72.71 The project has an IRR of 15% and a positive NPV, suggesting it is financially viable.
5 Determine the IRR and MIRR for a project with a $65,000 cost and expected cash inflows of $12,000 annually for 9 years, with a 10% cost of capital. IRR = 12% MIRR = 11% The project’s IRR is 12%, while the MIRR, accounting for reinvestment rate, is slightly lower at 11%.
6 Compare NPV, IRR, and MIRR as capital budgeting methods. NPV, IRR, and MIRR offer different perspectives on project value, with MIRR providing a comprehensive assessment over time.