GB550 Purdue Global University Investment Project Assignment 1: Investment Project Value Your Assignment will be assessed by the following course outcome:

GB550 Purdue Global University Investment Project Assignment 1: Investment Project Value

Your Assignment will be assessed by the following course outcome:

GB550-3: Assess the value of proposed investment projects.

This Assignment addresses assessing the value of investment projects. Prepare this Assignment as a Word document. List each question followed by your answer.

Assignment 1: Problems

Complete Chapter 9 problem, 9-10, page 407
Complete Chapter 10 problems: 10-1, 10-2, 10-3, 10-4, 10-5, 10-6, and 10-7, page 443

Please submit this Assignment through the Dropbox.

Review the Assignment iinstructions and grading rubric

Directions for Submitting Assignment 1

Compose your Assignment in a Word document and save it as Username-GB550 Assignment 1-Unit#.doc (Example: TAllen-GB550 Assignment 1-Unit 4.doc). Submit your file by selecting the Unit 4: Assignment 1 Dropbox by the end of Unit 4. GB550: Financial Management
Unit 4 Assignment 1
Investment Project Value – Details and Rubric
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Complete Chapter 9 problem, 9–10, p. 407
Complete Chapter 10 problems, 10–1, 10–2, 10–3, 10–4, 10–5, 10–6, and 10–7, p. 443
Prepare this Assignment as a Word® document. List each question, followed by your answer. Please
submit this Assignment through the Dropbox.
Unit 4 Assignment 1: Investment Project Value
Criteria for Assignment Grades
Points
Possible
Provides correct and complete answers for questions and problems.
18
Clearly shows the reasoning and/or calculations used to arrive at the answer
or conclusion.
23
Demonstrates excellent college-level organization and style; presents work in
Excel® or Microsoft Word, showing all necessary formulas and steps.
4
Total
45
Points
Earned
(10-1)
NPV
EASY PROBLEMS 1-7
A project has an initial cost of $40,000, expected net cash inflows of $9,000 per year for
7 years, and a cost of capital of 11%. What is the project’s NPV? (Hint: Begin by constructing
a time line.)
Refer to Problem 10-1. What is the project’s IRR?
Refer to Problem 10-1. What is the project’s MIRR?
Refer to Problem 10-1. What is the project’s PI?
(10-2)
IRR
(10-3)
MIRR
(10-4)
Profitability Index
(10-5)
Payback
(10-6)
Discounted Payback
(10-7)
NPV
Refer to Problem 10-1. What is the project’s payback period?
Refer to Problem 10-1. What is the project’s discounted payback period?
Your division is considering two investment projects, each of which requires an up-front
expenditure of $15 million. You estimate that the investments will produce the following
net cash flows:
Year
Project A Project B
1
S 5,000,000 $20,000,000
2
10,000,000 10,000,000
3
20,000,000
6,000,000
han
Il Piatr Paren
cord in
ni
ante
Cost of Equity
The earnings, dividends, and stock price of Shelby Inc. are expected to grow at
7% per year in the future. Shelby’s common stock sells for $23 per share, its last
dividend was $2.00, and the company will pay a dividend of $2.14 at the end of the
current year.
a. Using the discounted cash flow approach, what is its cost of equity?
b. If the firm’s beta is 1.6, the risk-free rate is 9%, and the expected return on the
market is 13%, then what would be the firm’s cost of equity based on the CAPM
approach?

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