3. Replacing old equipment at an immediate cost of $120,000 and an additional outlay of $10,000 five years from now will result in savings of $24,000 per year for 9 years. The required rate of return is 12% compounded annually. Compute the net present value and determine if the investment should be accepted or rejected according to the net present value criterion. The net present value of the project is $ (Round the final answer to the nearest dollar as needed. Round all intermediate values to six decimal places as needed.) The proposal should be (1) (1) O accepted. O rejected.

3. Replacing old equipment at an immediate cost of $120,000 and an additional outlay of $10,000 five years from now will result in savings of $24,000 per year for 9 years. The required rate of return is 12% compounded annually. Compute the net present value and determine if the investment should be accepted or rejected according to the net present value criterion. The net present value of the project is $ (Round the final answer to the nearest dollar as needed. Round all intermediate values to six decimal places as needed.) The proposal should be (1) (1) O accepted. O rejected.

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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Use the NPV method to determine whether Vargas Products should invest in the following projects: Project A costs $290,000 and offers seven annual net cash inflows of $65,000. Vargas Products requires an annual return of 16% on projects like A. Project B costs $375,000 and offers ten annual net cash inflows of $68,000. Vargas Products demands an annual return of 12% on investments of this nature. (Click the icon to view the present value annuity table.) (Click the icon to view the present value table.) (Click the icon to view the future value annuity table.) (Click the icon to view the future value table.) Requirement What is the NPV of each project? What is the maximum acceptable price to pay for each project? Calculate the NPV of each project. (Round your answers to the nearest whole dollar. Use parentheses or a minus sign for negative net present values.) The NPV of Project A is $ (27,465) . The NPV of Project B is $ 9,200 Now calculate the maximum acceptable price to pay for each…
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NPV and IRR Benson Designs has prepared the following estimates for a long-term project it is considering. The initial investment is $17,950, and the project will yield cash inflows of $3,000 per year for 9 years. The firm has a cost of capital of 8%. a. Determine the net present value (NPV) for the project. b. Determine the internal rate of return (IRR) for the project. c. Would you recommend that the firm accept or reject the project?
(Paybackperiod, NPV, PI, and IRR calculations) You are considering a project with an initial cash outlay of $80,000 and expected free cash flows of $26,000 at the end of each year for 6 years. The required rate of return for this project is 7 percent. a. What is the project's payback period? b. What is the project's NPV? c. What is the project's PI? d. What is the project's IRR?
Explain all point of question with proper explanation.
The James Company is considering an investment with a cost today of $1,500,000 and which will produce the following net inflows: Year 1 600,000 Year 2 300,000 Year 3 200,000 Year 4 400,000 Year 5 500,000 What is the Payback Period for the investment?
An investment that costs $20,000 will produce annual cash flow's of $5000 for a period of six years further, the investment has an expected salvage value of $3000. Given a desired rate of return of 12%, what will the investment generate
You are evaluating a project that will cost $502,000, but is expected to produce cash flows of $127,000 per year for 10 years, with the first cash flow in one year. Your cost of capital is 10.7% 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. (Round to two decimal places.) b. Should you take the project if you want to increase the value of the company? (Select from the drop-down menus.) If you want to increase the value of the company you take the project since the NPV is will not will
1. An analyst offers three investment alternatives with the initial investment of A= $200,000; B= $300,000 and C= $100,000. The net annual income for these alternatives over the next 10 years includes $40,000; $55,000 and $19,000 respectively. Use IRR to choose the best alternative. MARR= 10% and no salvage values after 10 years.
(Net present value calculation) Big Steve's, makers of swizzle sticks, is considering the purchase of a new plastic stamping machine. This investment requires an initial outlay of $105,000 and will generate net cash inflows of $21,000 per year for 8 years. a. What is the project's NPV using a discount rate of 8 percent? Should the project be accepted? Why or why not? b. What is the project's NPV using a discount rate of 16 percent? Should the project be accepted? Why or why not? c. What is this project's internal rate of return? Should the project be accepted? Why or why not? a. If the discount rate is 8 percent, then the project's NPV is $ (Round to the nearest dollar.)
Consider an investment project in which you invest $3,500 today in order to receive $525 at the end of each of the next 10 years. If the cost of capital is 12% per year, what is the IRR and should the project be accepted? 7.23%, accept project 7.23%, reject project 5.28%, accept project 5.28%, reject project 8.14%, reject project 8.14%, accept project a. b. C. d. e. O f.
A project that provides annual cash flows of $22,500 for 7 years costs $84,000 today. a. If the required return is 12 percent, what is the NPV for this project? b. Determine the IRR for this project.

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