MYUSF* My Horne2 CengageNOWv2 |Online teachin Xgagenow.com/ilrn/takeAssignment/takeAssignmentMain.do?invoker=&takeAssignmentSessionLocator=&inpro...to伯Vanessa Company is evaluating a project requiring a capital expenditure of $480,000. The project has an estimated life of 4 years and no salvage value.The estimated net income and net cash flow from the project are as followS:YearNet IncomeNet Cash Flow$90,000$210,00080,000200,0003.40,000160,000430,000150,000$240,000$720,000The company's minimum desired rate of return for net present value analysis is 15%. The factors for the present value of $1 at compound interest of15% for 1, 2, 3, and 4 years are 0.870, 0.756, 0.658, and 0.572, respectively.Determine (a) the average rate of return on investment and (b) the net present value for the project.a. Average rate of return on investmentb. Net present valueNext,(Previous10:00 PM5/8/2021%241.

Average rate of return = Average net income/Average investment Average investment = Initial…

15% for 1, 2, 3, and 4 years are 0.870, 0.756, 0.658, and 0.572, respectively. Determine (a) the average rate of return on investment and (b) the net present value for the project. a. Average rate of return on investment % b. Net present value

15% for 1, 2, 3, and 4 years are 0.870, 0.756, 0.658, and 0.572, respectively. Determine (a) the average rate of return on investment and (b) the net present value for the project. a. Average rate of return on investment % b. Net present value

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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MYUSF
* My Horne
2 CengageNOWv2 |Online teachin X
gagenow.com/ilrn/takeAssignment/takeAssignmentMain.do?invoker=&takeAssignmentSessionLocator=&inpro...
to
伯
Vanessa Company is evaluating a project requiring a capital expenditure of $480,000. The project has an estimated life of 4 years and no salvage value.
The estimated net income and net cash flow from the project are as followS:
Year
Net Income
Net Cash Flow
$90,000
$210,000
80,000
200,000
3.
40,000
160,000
4
30,000
150,000
$240,000
$720,000
The company's minimum desired rate of return for net present value analysis is 15%. The factors for the present value of $1 at compound interest of
15% for 1, 2, 3, and 4 years are 0.870, 0.756, 0.658, and 0.572, respectively.
Determine (a) the average rate of return on investment and (b) the net present value for the project.
a. Average rate of return on investment
b. Net present value
Next,
(Previous
10:00 PM
5/8/2021
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Year Cashflow Interest rate 11% 0 (294,000) 1 106,448 2 97,628 3 88,808 4 127,518 Calculate the Project's NPV, IRR, MIRR, and payback. Do these indicators suggest that the project should be accepted? Explain
Average Rate of Return Determine the average rate of return for a project that is estimated to yield total income of $467,480 over four years, has a cost of $725,400, and has a $80,600 residual value. Round to the nearest whole number.
Compute the payback perlod for an Investment with the following net cash flows. (Round your answer to one decimal place.) Net Cash Flows per Year Cumulative Net Cash Flows $ (101,000) $ (101,000) (90,900) (70,800) Year Initial investment 1. 2. 3. 5. 6. Payback period 10,100 20,100 20,100 26,640 40,100 40,100 years (50,700) (24,060) 16,040 56,140
D-78 Which of the following equations can be used to find the internal rate of return (i) for a project that hun initial investment of P, net annual cash flows of A, and salvage value of S after n years? (a) 0 = -P + AP/A, i%,n) + SP/A, i%, n) | (b) (Р — А)P/А, 1%, п) — SPIF, 1%, n) (с) — А %3D — РАР, %, п) — S(AF, i1%, п — 1) (d) 0 = -PF/P, i%,n) + A(F/A, i%, n) + S
A firm has projected the following financials for a possible project: YEAR Sales Cost of Goods S&A Depreciation Investment in NWC Investment in Gross PPE 0 1,130.00 105,468.00 1 132,716.00 Submit 549.00 2 62,780.00 62,780.00 30,000.00 30,000.00 30,000.00 21,093.60 21,093.60 21,093.60 Answer format: Currency: Round to: 2 decimal places. 3 132,716.00 132,716.00 132,716.00 549.00 What is the NPV of the project? (Hint: Be careful about rounding the WACC here!) 4 62,780,00 62,780.00 62,780.00 30,000.00 549.00 21,093.60 549.00 5 132,716.00 The firm has a capital structure of 37.00% debt and 63.00% equity. The cost of debt is 9.00%, while the cost of equity is estimated at 15.00%. The tax rate facing the firm is 38.00%. (Assume that you can't recover the final NWC position in year 5. i.e. only consider the change in NWC for each year) 30,000.00 21,093.60 549.00
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Based on the information below, calculate the adjusted present value (APV), given that the project lifespan is 1 year and is being financed by 30% debt: Investment at t=0 € 33,000 Cashflow after yr1 € 39,600 Cost of capital (COC) 53% Cost of debt 43% Tax 33% a) The adjusted present value (APV) is: €-4325.31 b) The adjusted present value (APV) is: €-5307.69 c) The adjusted present value (APV) is: €-7117.65 d) The adjusted present value (APV) is: €-6135.26
Suppose the MARR is 12%. Use the following table to answer the question--The IRR on the CMS Investment is CMS FMS Initial Investment Annual Revenue Useful Life (Years) A. 17.0% - 18.0% B. 20.0% - 21.0% C. 15.0% - 16.0% D. 0.5% -1.0% E. 11.0% - 12.0% $20,000 6,688 15 $29,000 9,102 in 5
Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 (434,000) (44,500) 1 $39,500 $21,300 2 $66,500 $12,400 3 $83,500 $23,100 4 $549,000 $19,900 The re quired return on these investments is 11 percent. a. What is the payback period for each project? Note: Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. b. What is the NPV for each project? Note: Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. c. What is the IRR for each project? Note: Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16. d. What is the profitability index for each project? Note: Do not round intermediate calculations and round your answers to 3 decimal places, e.g., 32.161. e. Based on your answers in (a) through (d), which project will you finally choose?
Calculate the Payback period (PBP) and Profitability Index (PI) of the investment and state the Pro’s and Cons of this method The annual incremental profits/ (losses) relating to the investment are estimated as follows: Years CF’s (000) Year 0 -175,000 Year 1 K11,000 Year 2 K3,000 Year 3 K34,000 Year 4 K47,000 Year 5 K8,000 Investment at the start of the project would be K175, 000,000.the investment sum assuming nil disposal value after five years, would be written off using the equal instalment method. The depreciation has been included in the profit estimates above, which should be assumed to arise at each year end. Assume the cost of Capital is 12% Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 D.f 1.00 0.893 0.797 0.712 0.636 0.567

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