# Build a ModelBuild a Model112618Chapter10Problem23Gardial Fish.docx

18 Nov 2022
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### Build a ModelBuild a Model112618Chapter10Problem23Gardial Fish.docx

• 1. Build a ModelBuild a Model11/26/18Chapter:10Problem:23Gardial Fisheries is considering two mutually exclusive investments. The projects' expected net cash flows are as follows:Expected Net Cash FlowsTimeProject AProject B0(\$375)(\$575)1(\$300)\$1902(\$200)\$1903(\$100)\$1904\$600\$19 05\$600\$1906\$926\$1907(\$200)\$0a. If each project's cost of capital is 12%, which project should be selected? If the cost of capital is 18%, what project is the proper choice? @ 12% cost of capital @ 18% cost of capitalUse Excel's NPV function as explained in this chapter's Tool Kit. Note that the range does not include the costs, which are added separately.WACC =12%WACC =18%NPV A =NPV A =NPV B =NPV B =At a cost of capital of 12%, Project A should be selected. However, if the cost of capital rises to 18%, then the choice is reversed, and Project B should be accepted.b. Construct NPV profiles for Projects A and B.Before we can graph the NPV profiles for these projects, we must create a data table of project NPVs relative to differing costs of capital.Project AProject B0%2%4%6%8%10%12%14%16%18%20%22%24%26%28%30 %c. What is each project's IRR?We find the internal rate of return with Excel's IRR function:IRR A =Note in the graph above that the X-axis intercepts are equal to the two projects' IRRs.IRR B =d. What is the crossover rate, and what is its significance?Cash flowTimedifferential012Crossover rate =34The crossover rate represents the cost of capital at which the two projects value, at a cost of capital of 13.14% is: have the same net present value. In this scenario, that common net present567e. What is each project's MIRR at a cost of capital of 12%? At r = 18%? Hint: note that B is a 6-year project. @ 12% cost of capital @ 18% cost of capitalMIRR A = DII Labs: Use Excel's MIRR function
• 2. DII Labs: The difference in cash flows between Project "A" and Project "B". DII Labs: Net Present Value of "A" discounted at a WACC of 12% DII Labs: The IRR for the Cash Flow Differential DII Labs: Net Present Value of "A" discounted at a WACC of 18% MIRR A =MIRR B =MIRR B =f. What is the regular payback period for these two projects?Project ATime period01234567Cash flow(375)(300)(200)(100)600\$600\$926(\$200)Cumulative cash flowIntermediate calculation for paybackPayback using intermediate calculationsProject BTime period01234567Cash flow-\$575\$190\$190\$190\$190\$190\$190\$0Cumulative cash flowIntermediate calculation for paybackPayback using intermediate calculationsPayback using PERCENTRANKOk because cash flows follow normal pattern.g. At a cost of capital of 12%, what is the discounted payback period for these two projects?WACC =12%Project ATime period01234567Cash flow-\$375-\$300-\$200-\$100\$600\$600\$926-\$200Disc. cash flowDisc. cum. cash flowIntermediate calculation for paybackPayback using intermediate calculationsProject BTime period01234567Cash flowDisc. cash flowDisc. cum. cash flowIntermediate calculation for paybackPayback using intermediate calculationsDiscounted Payback using
• 3. PERCENTRANKOk because cash flows follow normal pattern.h. What is the profitability index for each project if the cost of capital is 12%?PV of future cash flows for A:PI of A:PV of future cash flows for B:PI of B: NPV Profiles 00.020.040.060.080.10.120.140000000000000010.160.180.20.2 20.240.260.280000000000000030.300.020.040.060.080.10.120. 140000000000000010.160.180.20.220.240.260.28000000000000 0030.3 Cost of Capital NPV Project A Project B 4 References Machado, G. V., Cunha, Í., Pereira, A., & Oliveira, L. B. (2019). DOD-ETL: distributed on-demand ETL for near real- time business intelligence. Journal of Internet Services and Applications, 10(1), 1-15. https://link.springer.com/article/10.1186/s13174-019-0121-z Munappy, A. R., Mattos, D. I., Bosch, J., Olsson, H. H., & Dakkak, A. (2020, June). From ad-hoc data analytics to dataops. In Proceedings of the International Conference on Software and System Processes (pp. 165-174). https://research.chalmers.se/publication/521464/file/521464_Ful ltext.pdf
• 4. Qayyum, R. (2020). A roadmap towards big data opportunities, emerging issues and Hadoop as a solution. Rida Qayyum." A Roadmap Towards Big Data Opportunities, Emerging Issues and Hadoop as a Solution ", International Journal of Education and Management Engineering (IJEME), 10(4), 8-17. https://j.mecs-press.net/ijeme/ijeme-v10- n4/IJEME-V10-N4-2.pdf Activity: Develop Your Recommendation with Evidence Replicate the orange columns in your notebook. Steps Name of Steps Description of Steps
• 5. Guidance to Success Citations 3 Form your recommendation Use your selected company/organization/ program/policy as a basis for your recommendation. Connect this recommendation to the research problem. · Identify what is the same and different between your research population and the ‘solution’s’ population: Same: Different: · Explain how you envision the “specific parts of the ‘solution’”
• 6. helping to mitigate your research problem: · What must be changed/altered to work for YOUR problem?:
• 7. Activity: Find a Company/Organization/Policy Working to Mitigate the Problem Steps Name of Steps Description of Steps Guidance to Success Citations 2 Find and summarize an existing evidence-based solution to use as a foundation to YOUR recommendation. Conduct further research to find a company/organization/ program/policy that is doing a good job trying to mitigate this problem (this could be from another state or even another
• 8. country where populations are comparable). · Include the name of company/organization/ program/policy: · Include detailed evidence that this ‘solution’ is working (do not forget to include dates/years, and statistics as support): · Identify specific ‘parts’ of the ‘solution’ that you think will be useful and define/summarize them: Replicate the orange columns in your notebook.
• 9. Activity: Summarize Your News Article to Identify the Problem and Populations Affected Replicate the orange columns in your notebook. Steps Name of Steps Description of Steps Guidance to Success Citations 1 Summarize, making sure to identify: · the problem
• 10. · populations affected by the problem · location of the problem, if applicable Whatever your research problem is, you will need to summarize the proof that the problem exists today by providing an ‘example’ of your research problem happening in the world. For your ‘example’, you will use a news article or even your research articles for KG-604, but in other courses it may be a case study from your textbook, a summary of the problem provided by your professors, or you may need to find a relevant ‘case’ on your own. 1. Identify the problem: 2. Identify populations affected:
• 11. 3. Identify the location: