# FINANCE 2 - NEED DONE WITHIN 1 HOUR

(NPV, PI, and IRR calculations) Fijisawa, Inc. is considering a major expansion of its product line and has estimated the following cash flows associated with such an expansion. The initial outlay would be $1,960,000, and the project would generate cash flows of $380,000 per year for six years. The appropriate discount rate is 4.0 percent.

- Calculate the net present value.
- Calculate the profitability index.
- Calculate the internal rate of return.
- Should this project be accepted? Why or why not?

## 100% CORRECT

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**SOLUTION :**

**xx**

**xxx **= - 1960000 x xxxxxxxxxxxxx -1)/(0.04*1.04^6) **= xxxxx xxx (ANSWER).**

**b.**

xx

**xx **x PV of xxxxxx x Investment =380000(1.04^6 xxxxxxxxxxxxxxxxx x 1960000

x xxxxxxx x 1960000

**x xxxxx xxxxxxxxx**

**c.**

xxxxx online calc. xxx x http://vindeep.com/Calculators/IRRCalculator.aspx x

xxx xx xxx data, press calculate, we xxxx** IRR = 4.50 % xxxxxxxxx**

**d.**

**xxxxxxx should be xxxxxxxx xx NPV xx xxxxxxxxx PI is greater xxxx 1, xxx IRR is higher xxxx discount xxxx xx 4%.**

** **

## finance 2

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# xxxxxx

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx PI, xxx IRR xxxxxxxxxxxxx Fijisawa, xxxx is considering x xxxxx expansion xx its xxxxxxx line xxx has estimated xxx xxxxxxxxx xxxx xxxxx associated xxxx such xx xxxxxxxxxx The xxxxxxx xxxxxx xxxxx xx xxxxxxxxxxx and xxx xxxxxxx xxxxx xxxxxxxx xxxx flows xx xxxxxxxx per year xxx six xxxxxx The xxxxxxxxxxx xxxxxxxx rate is 4.0 xxxxxxxx | |||

a. Calculate the xxx xxxxxxx value. | |||

xxxx | xxxxxxxx | PVIF | Present value |

x | x xxxxxxxxxxx | x | * (1,960,000) |

x | x 380,000 | xxxxxx | x xxxxxxx |

2 | x xxxxxxx | xxxxxx | * 351,331 |

3 | x xxxxxxx | xxxxxx | * 337,819 |

x | x 380,000 | 0.854804191 | x 324,826 |

x | * xxxxxxx | 0.8219 | * xxxxxxx |

x | x xxxxxxx | 0.7903 | * xxxxxxx |

xxx xxxxxxx value | x xxxxxxxxx | ||

xx xxxxxxxxx the xxxxxxxxxxxxx xxxxxx | |||

xxxx | xxxxxxxx | xxxx | xxxxxxx xxxxx |

x | * 380,000 | xxxxxx | * 365,385 |

x | x xxxxxxx | xxxxxx | x 351,331 |

x | * xxxxxxx | 0.8890 | x 337,819 |

x | * 380,000 | 0.854804191 | * xxxxxxx |

5 | * 380,000 | xxxxxx | x xxxxxxx |

x | x xxxxxxx | xxxxxx | x 300,320 |

x 1,992,012.01 | |||

Profitability index x Present xxxxx xx xxxx xxxxxxxxxxxxxxx value of cash outflows | |||

PV of cash xxxxxxx | * xxxxxxxxxxxx | ||

PV of xxxx xxxxxxxx | x 1,960,000 | ||

Profitability xxxxx x | xxxx | ||

c. xxxxxxxxx the xxxxxxxx xxxx xx return. | |||

Year | xxxxxxxx | ||

x | * (1,960,000) | ||

1 | x xxxxxxx | ||

x | * xxxxxxx | ||

x | x 380,000 | ||

4 | x 380,000 | ||

5 | * xxxxxxx | ||

6 | x 380,000 | ||

xxxxxxxx rate xx xxxxxx | 4.50% |

Try it before you buy it |