1. A project requires an initial capital cost of (40 million ID). The investor expects the project will generate annual returns of (12 million ID), with expenditures about (4 million ID) annually. If you know that the economic life is (12) years, and the salvage value after the end of the economic life is (4 million ID). Considering that the less acceptable interest rate for the investor is (10%): A. Determining the economic feasibility for investing using the present worth method? B. What is the equivalent annual worth of this investment? C. Find the internal rate of return?

1. A project requires an initial capital cost of (40 million ID). The investor expects the project will generate annual returns of (12 million ID), with expenditures about (4 million ID) annually. If you know that the economic life is (12) years, and the salvage value after the end of the economic life is (4 million ID). Considering that the less acceptable interest rate for the investor is (10%): A. Determining the economic feasibility for investing using the present worth method? B. What is the equivalent annual worth of this investment? C. Find the internal rate of return?

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Suppose you are considering a project with an initial investment of $500,000. This project has an estimated net present value (NPV) of $750,000. How would you explain the meaning of the $750,000 net present value (NPV) to a nonfinancial manager? O The positive NPV indicates this project is expected to increase the value of the firm by $250,000. The positive NPV indicates this project is expected to increase the value of the firm by $750,000. The project benefits outweigh the costs by $250,000 on a present value basis. O The project benefits outweigh the costs by $500,000 on a present value basis.
Please answer the question. The details of the question are attached in the image below.
You are considering an investment with the following characteristics. The investment will cost you $551 today, but will pay you annual benefits of $107 for 11 years starting at the end of the first year. The relevant opportunity cost of capital is 9%. What is the NPV of this investment? Round your answer to two decimals. Enter negative values with a - sign. Don't enter the $-symbol as part of your answer.
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Assume you are the finance manager of Methanol Company, and the company is considering investing in one of the two projects. The life for both the Projects X and Project Y is 6 years. Project X costs OMR. 20500 and Project Y costs OMR.20500. The discount rate/cost of capital is 3.55%. Required: Use the following techniques to help company to decide which Machine is better and justify why? a) Payback period b) Discount payback period c) Net Present Value d) Present value index -Profitability index.
K You have been offered a unique investment opportunity. If you invest $11,300 today, you will receive $565 one year from now, $1,695 two years from now, and $11,300 ten years from now. a. What is the NPV of the opportunity if the cost of capital is 5.7% per year? Should you take the opportunity? b. What is the NPV of the opportunity if the cost of capital is 1.7% per year? Should you take it now? a. What is the NPV of the opportunity if the cost of capital is 5,7% per year? If the cost of capital is 5.7% per year, the NPV is $. (Round to the nearest cent.)
I need to know the Cash payback period for each project, the Net present value, the annual rate of return for each project and finally I need the projects ranked best to worse (1, 2, 3) on their cashpayback, net present value, and annual return. Finally I need to know which is the best project. Question 1 of 1 > E Pharoah Company is considering three long-term capital investment proposals. Each investment has a useful life of 5 years. Relevant data on each project are as follows. Project Bono Project Edge Project Clayton Capital investment $172,000 $182,000 $202,000 Annual net income: Year 1 14,700 18,900 28,350 2 14,700 17,850 24,150 3 14,700 16,800 22,050 4 14,700 12.600 13,650 5 14,700 9,450 12,600 5 14,700 9,450 12,600 Total $73,500 $75,600 $100,800 Depreciation is computed by the straight-line method with no salvage value. The company's cost of capital is 15%. (Assume that cash flows occur evenly throughout the year.)
2a. Explain the concept of Net Present Value and Discount rates. Gentry Limited is deciding whether to undertake a project which longs for three years. The expected total project cost is 15,000,000 ZMW today and the expected income after three years will be $25,000,000 ZMW. Use a discount rate of 10% to advise Gentry Limited director if this is a good investment or not. Give reasons for your answer.
You are evaluating five investment projects. You already calculated the rate of return for each alternative investment and incremental rate of return between the two alternatives as well. In calculating the incremental rate of return, a lower cost investment project is subtracted from the higher cost investment project. All rate of return figures are rounded to the nearest integers. Investment Alternative Initial Investment ($) Rate of Return (%) Rate of Return on Incremental Investment (%) A CDE A B C D E b.Select E. c. Select B. 35,000 45,000 d. Do nothing. 50,000 65,000 80,000 12 15 13 20 18 B 28 20 36 27 12 40 22 If all investment alternatives are mutually exclusive and the MARR is 12%, which alternative should be chosen? a. Select D. 42 25 -5
1. Calvulate the internal rate of return(IRR) of each project and based on this criterion. Indicate which project you would recommend or acceptance.
You are interested in investing in an office building. You expect the building's net operating income will grow at a constant rate of 4.5% per year during your anticipated holding period. If you are confident that you can earn 10.7% annual return somewhere else on projects of comparable risk, the reasonable cap rate for you to use in evaluating this building should be %? Write your answer without %. E.g. if you answer is 21.5%, just write 21.5
Consider two mutually exclusive alternatives and the do-nothing approach. Project X has an initial investment of $175 and annual positive cash flows of $65 for four years. Project Y has an initial investment of $88 and annual positive cash flows of $25 for four years. Determine the following: at what interest rates Project X would be attractive? at what interest rates would Project Y be attractive? at what interest rates would it be best to do nothing.

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