Assignment-01 Advanced Financial Management

Name:

Roll No.

Program:

Semester:

1-Swanson Industries has four potential projects all with an initial cost of $2,000,000.
The capital budget for the year will only allow Swanson industries to accept one of the
four projects. Discount rate Cost of Capital is 9%
Cash Flows
Year one
Year two
Year three
Year four
Year five

Project M
$500,000
$500,000
$500,000
$500,000
$500,000

Project N
$600,000
$600,000
$600,000
$600,000
$600,000

Project O
$1,000,000
$800,000
$600,000
$400,000
$200,000

Project P
$300,000
$500,000
$700,000
$900,000
$1,100,000

Calculate Payback period, discounted payback period, Net present value and
Profitability index for each of the project.
Mark(s)=20

Which project to accept according to Payback period, discounted payback period,

Net present value and Profitability index
Mark(s)=05

What is your final decision and why?

Mark(s)=05

2. Given the following After Tax Cash Flows for Tylers Tinkering Toys on a new toy
find the Payback Period, Discounted payback period, NPV and Profitability Index of
this project. The appropriate discount rate for the project is 12%.
Determine if the project is accepted or rejected under the different decision models.
Mark(s)=30
Year 0 cash outflow: $10,400,000
Years 1 to 4 cash inflow: $2,600,000 each year
Year 5 cash outflow: $1,200,000
Years 6 8 cash inflow: $750,000 each year