2. A financial manager must choose between four alternative Assets: 1, 2, 3, and 4. Eachasset costs $35,000 and is expected to provide earnings over a three-year period asdescribed below.AssetYear 1Year 2Year 3P 21,0009,0003,000P 15,00015,00020,00012,000P 6,00021,00019,00012,0002346,000Based on the profit maximization goal, the financial manager would chooseA. Asset 1.B. Asset 2.C. Asset 3.D. Asset 4.

In financial management, profit maximization is the goal of the financial manager in which he seeks…

2. A financial manager must choose between four alternative Assets: 1, 2, 3, and 4. Each asset costs $35,000 and is expected to provide earnings over a three-year period as described below. Year 1 P 21,000 9,000 3,000 6,000 Year 2 P 15,000 15,000 20,000 12,000 Year 3 P 6,000 21,000 19,000 12,000 Asset 1 2 3 4 Based on the profit maximization goal, the financial manager would choose A. Asset 1. B. Asset 2. C. Asset 3. D. Asset 4.

2. A financial manager must choose between four alternative Assets: 1, 2, 3, and 4. Each asset costs $35,000 and is expected to provide earnings over a three-year period as described below. Year 1 P 21,000 9,000 3,000 6,000 Year 2 P 15,000 15,000 20,000 12,000 Year 3 P 6,000 21,000 19,000 12,000 Asset 1 2 3 4 Based on the profit maximization goal, the financial manager would choose A. Asset 1. B. Asset 2. C. Asset 3. D. Asset 4.

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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3.2 A company has to choose between two different investments.Investment A: This investment requires an immediate outlay of $70,000 and another investment of $30,000 in year 3. The investment will return annual profits of $35,000 from year 2 to year 6. At the end of year 6, the investment has a residual value of $15,000.Investment B: This investment requires an immediate outlay of $40,000 and additional investments of $10,000 per year from year 1 to year 3. The investment will return annual profits of $29,000 from year 4 to year 6. At the end of year 6, the investment has a residual value of $25,000.The cost of capital is 9%. a. Calculate the NPV for investment A. b. Calculate the NPV for investment B. c. Which investment should the company choose? Investment A Investment B Niether Kindly use all the decimals. DO NOT ROUND
8. Assume a $90,000 investment and the following cash flows for two alternatives: Year 1 2 3 4 5 Investment Investment A B $25,000 30,000 25,000 19,000 25,000 $40,000 40,000 28,000 a. Calculate the payback for Investments A and B. b. If the inflow in the fifth year for Investment A was $25,000,000 instead of $25,000, would your answer change under the payback method?
please read the first direction on picture one, and answer on picture 2. thank you for your time.
Average Rate of Return Method, Net Present Value Method, and Analysis for a service company The capital investment committee of Arches Landscaping Company is considering two capital investments. The estimated operating income and net cash flows from each investment are as follows: Front-End Loader Greenhouse Operating Net Cash Operating Net Cash Year Income Flow Income Flow 1 $32,300 $103,000 $68,000 $165,000 32,300 103,000 52,000 139,000 32,300 103,000 26,000 98,000 4. 32,300 103,000 11,000 67,000 32,300 103,000 4,500 46,000 Total $161,500 $515,000 $161,500 $515,000 Each project requires an investment of $380,000. Straight-line depreciation will be used, and no residual value is expected. The committee has selected a rate of 10% for purposes of the net present value analysis. Present Value of $1 at Compound Interest Year 6% 10% 12% 15% 20% 0.943 0.909 0.893 0.870 0.833 0.890 0.826 0.797 0.756 0.694 0.840 0.751 0.712 0.658 0.579
1.4 The table represents the cash flows received from the investments at the end year. Each investment requires an initial investment of $1000. Answer the questions related to the two investment opportunities in the table below. Year 1 2 3 4 5 Investment A 225 215 250 225 205 Investment B 220 225 250 250 210 There are two approaches to evaluate this investment. Show the necessary calculations. • Assume the interest rate ot 4.33%. Use present value analysis to determine which investment you should choose? Calculating the rate of returns of the investment, which investment would you choose and why?
Given the following data for Year 1: Earnings before Interest and Tax = $11 million; Interests = $3 million, Taxes = $2 million; Depreciation = $4 million; Investment in fixed assets = 5 million; Investment net working capital = $1 million. Calculate the free cash flow (FCF) for Year 1: Group of answer choices $8 million $9 million $6 million $7 million
Average Rate of Return Method, Net Present Value Method, and Analysis for a service company The capital investment committee of Arches Landscaping Company is considering two capital investments. The estimated operating income and net cash flows from each investment are as follows: Front-End Loader Greenhouse Year OperatingIncome Net CashFlow OperatingIncome Net CashFlow 1 $55,800 $181,000 $117,000 $290,000 2 55,800 181,000 89,000 244,000 3 55,800 181,000 45,000 172,000 4 55,800 181,000 20,000 118,000 5 55,800 181,000 8,000 81,000 Total $279,000 $905,000 $279,000 $905,000 Each project requires an investment of $620,000. Straight-line depreciation will be used, and no residual value is expected. The committee has selected a rate of 12% for purposes of the net present value analysis. Present Value of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 0.890 0.826 0.797 0.756 0.694 3 0.840 0.751 0.712…
2. Calculating Project NPV The Fleming Company is considering a new investment. Financial projections for the investment are tabulated below. The corporate tax rate is 22 percent. Assume all sales revenue is received in cash, all operating costs and income taxes are paid in cash, and all cash flows occur at the end of the year. All net working capital is recovered at the end of the project. Investment Sales revenue Operating costs Depreciation Net working capital spending Year 0 $32,800 450 Year 1 Year 2 Year 3 Year 4 $14,200 2,100 8,200 175 $15,900 $15,700 2,100 2,100 8,200 8,200 250 275 $12,900 2,100 8,200 ? a. Compute the incremental net income of the investment for each year. b. Compute the incremental cash flows of the investment for each year. c. Suppose the appropriate discount rate is 12 percent. What is the NPV of the project?
Average Rate of Return Method, Net Present Value Method, and Analysis for a service company The capital investment committee of Arches Landscaping Company is considering two capital investments. The estimated operating income and net cash flows from each investment are as follows: Front-End Loader Greenhouse Year OperatingIncome Net CashFlow OperatingIncome Net CashFlow 1 $58,000 $183,000 $122,000 $293,000 2 58,000 183,000 93,000 247,000 3 58,000 183,000 46,000 174,000 4 58,000 183,000 20,000 119,000 5 58,000 183,000 9,000 82,000 Total $290,000 $915,000 $290,000 $915,000 Each project requires an investment of $580,000. Straight-line depreciation will be used, and no residual value is expected. The committee has selected a rate of 10% for purposes of the net present value analysis. Present Value of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 0.890 0.826…
spreadsheet 10.1

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