Finance

1.  Project Analysis:  What are some differences in the analysis for a replacement project versus that for a new expansion project?  Please note: Your initial post should be approximately 250-500 words, and cite at least one reference used in preparing your response. 

2.  Projects and Their Valuation Spreadsheet Problem 10-23 (answer a thru h):  

Start with partial model in the file Ch10 P23 Build a Model.xls (see attached document). Gardial Fisheries is considering two mutually exclusive investments.  The projects’ expected net cash flows are as follows:

(10-23)			Expected Net Cash Flows	
	Year		Project A		Project B		
	0		-375		-575		
	1		-300		190		
	2		-200		190		
	3		-100		190		
	4		 600		190		
	5		 600		190		
	6		 926		190		
	7		-200		0	

a. If each project- cost of capital is 12%, which project should be selected?  If the cost of capital is 18%, what project is the proper choice?
b. Construct NPV profiles for Projects A and B.
c. What is each project- IRR?
d. What is the crossover rate, and what is its significance?
e. What is each project- MIRR at a cost of capital of 12%? At r=18%? (Hint: Consider Period 7 as the end of Project B- life)
f. What is the regular payback period for these two projects?
g. At a cost of capital of 12%, what is the discounted payback period for these two projects?
h. What is the profitability index for each project if the cost of capital is 12%?

3.  Question 11-2:  Operating cash flows, rather than accounting profits, are used in project analysis.  What is the basis for this emphasis on cash flows as opposed to net income? 

Required Text

Brigham and Ehrhardt (2010) Financial Management: Theory and Practice. (13th Ed.) South Western, Thomson Learning, Inc. ISBN: 9781439078099