Economics Homework Help

Instructions:

Provide answers to all questions in a Word document.

You can submit the quantitative part of the assignment in an excel document.

Make sure all questions are answered fully.

Make sure you answer each question fully and in great detail.

Questions:

1. Which discount rate would you use in the estimation of the project’s NPV and why? Who is correct, Garcez or Fernandez and why?

2. Using Excel and the information you learned in Chapter 12, and assuming that the company faces a marginal corporate tax rate of 30 percent on earnings and other cash flows,

a. Estimate the project’s cash flows for each year (0 – 10) as shown in Table 12.1 of the book or my Chapter 12 lecture notes.

b. Calculate the net present value (NPV), internal rate of return (IRR), modified internal rate of return (MIRR) and payback for each investment. Information on how to use these methods can be found in Chapter 11 and Table 12.1.

c. Provide a recommendation to the company as to which project the firm should accept.

i. Make sure to carefully explain in some detail the why of your findings and recommendation.

ii. Which method (i.e., NPV, IRR, MIRR, or payback) is best to make the decision and why? Rank these methods from Best to Worse.

3. Outline any other factors that you think the Chilean Copper Exploration Company should consider prior to making its final decision on these projects, and whether, in your opinion, any of these factors warrant acceptance of one project over another, independent of financial concerns.