10- Assume that a company is considering opening a small store in İzmir. The store will cost 100 million TL to build, and the present value of the expected cash flows from the store is 120 million TL. Further assume that by opening this store, the company will have the chance to expand into a much larger store any time over the next 5 years. The cost of expansion will be 200 million TL, and it will be undertaken only if the present value of the expected cash flows exceeds 200 million TL. At the moment, the present value of the expected cash flows from the expansion is believed to be only 150 million. The variance is 0.08, 5-year risk-free rate is 6%. What would be the strategic NPV? 14.53 TL

10- Assume that a company is considering opening a small store in İzmir. The store will cost 100 million TL to build, and the present value of the expected cash flows from the store is 120 million TL. Further assume that by opening this store, the company will have the chance to expand into a much larger store any time over the next 5 years. The cost of expansion will be 200 million TL, and it will be undertaken only if the present value of the expected cash flows exceeds 200 million TL. At the moment, the present value of the expected cash flows from the expansion is believed to be only 150 million. The variance is 0.08, 5-year risk-free rate is 6%. What would be the strategic NPV? 14.53 TL

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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OpenSeas, Inc. is evaluating the purchase of a new cruise ship. The ship will cost $501 million and will operate for 20 years. OpenSeas expects annual cash flows from operating the ship to be $70.7 million and its cost of capital is 12.0%. a. Prepare an NPV profile of the purchase. b. Identify the IRR on the graph. c. Should OpenSeas go ahead with the purchase? d. How far off could OpenSeas's cost of capital estimate be before your purchase decision would change? SITTE a. Prepare an NPV profile of the purchase. To plot the NPV profile, we compute the NPV of the project for various discount rates and plot the curve. The NPV for a discount rate of 2.0% is $ million. (Round to one decimal place.)
5
Q7: Oil wells in the United States can operate and produce for an average of 20-40 years. Investing in an oil well requires foreseeing risks, opportunities, and costs associated with the project investment. Suppose you are an investor and considering investing in a project that will produce for 20 years. The expected annual production capacity is 25,000 barrels. The fixed cost of purchasing equipment, leasing land, drilling the well, and setting up production equipment is $15 million. The marginal cost of producing is $20 / barrel, and you expect the price of oil to be $80 / barrel for the entire lifespan of this rig. The annual interest rate is 10%. Should you invest? If yes, in which year will it start to be profitable? If no, why not?
7. A company is considering purchasing equipment for a new product line. The initial investment is R1,500,000. The equipment needs an upgrade after 5 years, this will cost another R750,000. The incremental cashflows for the next 10 years will be R500,000 per year, starting from the end of the first year. The investment period is 10 years. The company's WACC is 12%. Calculate the NPV and the MIRR for the project. Should the company invest in the equipment?
10- Assume that a company is considering opening a small store in İzmir. The store will cost 100 million TL to build, and the present value of the expected cash flows from the store is 120 million TL. Further assume that by opening this store, the company will have the chance to expand into a much larger store any time over the next 5 years. The cost of expansion will be 200 million TL, and it will be undertaken only if the present value of the expected cash flows exceeds 200 million TL. At the moment, the present value of the expected cash flows from the expansion is believed to be only 150 million. The variance is 0.08, 5-year risk-free rate is 6%. What would be the strategic NPV? O 14.53 TL O 18.81 TL 20.61 TL O 19.38 TL Diğer:
24. You are evaluating a project that will cost $534,000, but is expected to produce cash flows of $128,000 per year for 10 years, with the first cash flow in one year. Your cost of capital is 11% and your company's preferred payback period is three years or less. a. What is the payback period of this project? b. Should you take the project if you want to increase the value of the company? a. What is the payback period of this project? The payback period is ____years. b. If you want to increase the value of the company you (will/will not) take the project since the NPV is (negative/positive) **round to two decimal places**
11. I need help with finance home work question A company is considering a 7-year project. At the beginning of the project, a cash outflow in the amount of $340,000 would be required. The company expects the project would generate cash inflows in the amount of $70,000 at the end of each of the project's 7 years. Assume the company requires a return of 8%. What NPV does the company expect for this project?
3. A production machine purchase amounts to 800000€ . Its economic lifetime is 10 years. Residual value has been estimated to be 70000€ . The investment would yield 230000€ extra revenue per year and the annual running costs are 120000€ . The company's profit demand for this type of investment is 12% and it allows maximum five years' payback time for its investments. Calculate the profitability of the investment with the following methods: a) Net Present Value method b) Annuity method c) Internal rate of interest method d) Payback method
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18. Occidental Oman is thinking about a project where the initial investment is RO 12000 and the total life of the project is 5 years. The project is expected to generate RO 3800 every year during the entire life of project. If the management keeps a standard of 3 year as pay back then in this case the decision will be __________. a. The project is not worth as cash flow is not significant b. None of the options c. The project will be rejected because the payback period is more d. The project will be accepted because the payback period is less
The restaurant chain company ESTIASI Limited is considering the case of investing in a new restaurant which requires an initial cost of € 120,000. Cash inflows for the first two years are expected to be € 40,000, in the third year to increase to € 46,000 and in the fourth year to € 50,000. The annual capital cost of the company is 6%. Calculate the Net Present Value (CVA) of the investment
What is Question Four a. Assume that Green Housing Company is considering an investment of $200,000 in a new at the end of its useful life. The annual cash inflows are £250,000, and the annual cash outflows equipment. The new equipment is expected to last 12 years. It will have a zero salvage value are 150,000. Assume that the annual cash flows are uniform over the asset's useful life. Management has a required rate of return of 18%. i. Calculate the present value of net cash flows ii. Calculate the net present value for this investment iii. Calculate the Discounted Payback Period iv. Advice management of Green Housing Company base on your results

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