Chesapeake Transport Case
Submitted by: Submitted by kewalsh1
Views: 10
Words: 554
Pages: 3
Category: Business and Industry
Date Submitted: 02/16/2016 09:52 PM
Chesapeake Transport, Inc.
Name:
Section:
Part 1: Complete the Excel Spreadsheet.
Proposals:
A
B
Cost:
$
(200,000) $
(200,000)
Year =1
$
41,000 $
140,000
2
$
41,000 $
100,000
3
$
41,000 $
30,000
4
$
41,000 $
20,000
5
$
41,000
6
$
41,000
7
$
41,000
8
$
41,000
9
$
41,000
10
$
41,000
$
$
$
$
$
$
$
$
$
$
$
C
(400,000)
89,000
89,000
89,000
89,000
89,000
89,000
89,000
89,000
89,000
89,000
D
(200,000)
55,482
55,482
55,482
55,482
55,482
$
$
$
$
$
$
NPV@12%:
Ranking:
$31,659
3
$38,783
2
$102,870
1
NPV@16%:
Ranking:
($1,838)
3
$25,271
2
$30,157
1
($18,336)
4
IRR:
Ranking:
15.75%
3
1
18.00%
2
12.00%
4
Payback:
Ranking:
4
24.82%
4.88
1.60
1
$0
4
4.49
3.60
3
2
Part 2: Comparison of Mutually Exclusive Projects A & B
Compute the NPV's for both Proposals A & B using the given discount rates.
NPV @
NPV @
NPV @
NPV @
NPV @
NPV @
0.0%
10.0%
12.0%
16.0%
25.0%
1000.0%
A
$210,000
$51,927
$31,659
($1,838)
($53,609)
($195,900)
B
$90,000
$46,117
$38,783
$25,271
($448)
($186,422)
Plot a NPV profile of Proposals A &B using the NPV's computed above.
NPV of Proposals A & B
$250,000
$200,000
$150,000
$100,000
$50,000
$0
$0
($50,000)
0.0%
10.0%
12.0%
16.0%
25.0%
($100,000)
A
B
Calculate the Crossover Rate for the above NPV Profiles.
Proposals:
A
B
A-B
Cost:
$
(200,000) $
(200,000) $
Year =1
$
41,000 $
140,000 $
(99,000)
2
$
41,000 $
100,000 $
(59,000)
3
$
41,000 $
30,000 $
11,000
4
$
41,000 $
20,000 $
21,000
5
$
41,000
$
41,000
6
$
41,000
$
41,000
7
$
41,000
$
41,000
8
$
41,000
$
41,000
9
$
41,000
$
41,000
10
$
41,000
$
41,000
Crossover Rate is equal to the IRR of A-B =
A.
B.
10.86%
See above.
What projects should CTC accept for the coming year?...
