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Chapter 9 Assignment

This document contains the solutions to financial management assignment questions for a class. It includes calculations of net present value, profitability index, and internal rate of return for several investment projects. The key information provided is the formulas and calculations used to analyze investment projects under different evaluation methods and determine whether to accept or reject the projects based on the criteria for each method.

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abraam
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45 views

Chapter 9 Assignment

This document contains the solutions to financial management assignment questions for a class. It includes calculations of net present value, profitability index, and internal rate of return for several investment projects. The key information provided is the formulas and calculations used to analyze investment projects under different evaluation methods and determine whether to accept or reject the projects based on the criteria for each method.

Uploaded by

abraam
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Financial Management

Chapter 9 Assignment
Dr. Dina Fadaly
MBA: Group-B Azbakia
Students: Abraam Fahmy & Amany Fayek
9-4A

A- PV = PMT (PVIFAi,n) = 450,000 (PVIFA9,6yrs) = 450,000 x 4.486 = 2,018,700

NPV = PV - IO = 2,018,700 - 1,950,000 = 68,700

Accept the project as NPV is > 0


PV 2,018,700
B- PI = = = 1.04
IO 1,950,000
Accept the project as PI is > 1

C- PV = PMT (PVIFAi,n) =
1,950,000 = 450,000 (PVIFAi,6)
4.33 = PVIFAi,6yrs
IRR = 11%
Accept the project as IRR > Required Rate of Return

9-6A

Project A

- PV = PMT (PVIFAi,n) = 12,000 (PVIFA12,6yrs) = 12,000 x 4.111 = 49,332

NPV = PV - IO = 49,332 – 50,000 = -668

Reject the project as it is NPV < 0


PV 49,332
- PI = = = 0.99
IO 50,000
Reject the project as PI is < 1

- PV = PMT (PVIFAi,n) =
50,000 = 12,000 (PVIFAi,6)
4.17 = PVIFAi,6yrs
IRR = 11%
Reject the project as IRR < Required Rate of Return

Project B

- PV = PMT (PVIFAi,n) = 13,000 (PVIFA12,6yrs) = 13,000 x 4.111 = 53,443

NPV = PV - IO = 53,443 – 70,000 = -16,557

Reject the project as it is NPV < 0


PV 53,443
- PI = = = 0.76
IO 70,000
Reject the project as PI is < 1

- PV = PMT (PVIFAi,n) =
53,443 = 13,000 (PVIFAi,6)
4.111 = PVIFAi,6yrs
IRR = 11%
Reject the project as IRR < Required Rate of Return

9-7A

Project A

- PV = FV (PVIFi,n) = 600 (PVIF10,1yrs) = 600 x .909 = 545.4


- PV = FV (PVIFi,n) = 300 (PVIF10,2yrs) = 300 x .826 = 247.8
- PV = FV (PVIFi,n) = 200 (PVIF10,3yrs) = 200 x .751 = 150.2
- PV = FV (PVIFi,n) = 100 (PVIF10,4yrs) = 100 x .683 = 68.3
- PV = FV (PVIFi,n) = 500 (PVIF10,5yrs) = 500 x .621 = 310.5
- PV for all years = 1,322.2

NPV = PV - IO = 1,322.2 – 1,000 = 322.2

Accept the project as NPV is > 0


PV 1,322.2
- PI = = = 1.32
IO 1,000
Accept the project as PI is > 1

- PV = FV (PVIFi,n) = 600 (PVIF24,1yrs) = 600 x .806 = 483.6


- PV = FV (PVIFi,n) = 300 (PVIF24,2yrs) = 300 x .650 = 195
- PV = FV (PVIFi,n) = 200 (PVIF24,3yrs) = 200 x .524 = 104.8
- PV = FV (PVIFi,n) = 100 (PVIF24,4yrs) = 100 x .423 = 42.3
- PV = FV (PVIFi,n) = 500 (PVIF24,5yrs) = 500 x .341 = 170.5
- PV for all years = 996.2

IRR = 24%
Accept the project as IRR > Required Rate of Return
Project B

- PV = PMT (PVIFAi,n) = 3000 (PVIF10,4yrs) = 3000 x 3.170 = 9,510


PV = FV (PVIFi,n) = 9,510 (PVIF10,2yrs) = 9,510x .826 = 7,855.26
- PV = FV (PVIFi,n) = 5,000 (PVIF10,1yrs) = 5,000 x .909 = 4,545
- PV for all years = 12,400.26

NPV = PV - IO = 12,400.26 – 10,000 = 2400.26

Accept the project as NPV is > 0


PV 12,400.26
- PI = = = 1.240026
IO 10,000
Accept the project as PI is > 1

- PV = PMT (PVIFAi,n) = 3000 (PVIF15,4yrs) = 3000 x 2.690 = 8070


PV = FV (PVIFi,n) = 2,049 (PVIF20,2yrs) = 8229 x .718 = 5794.26
- PV = FV (PVIFi,n) = 5,000 (PVIF18,1yrs) = 5,000 x .847 = 4,235
- PV for all years = 10,029.26

IRR = 12%
Accept the project as IRR > Required Rate of Return

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