6) What is the Equivalent Annual Cost (EAC) for each of the two options for which the annualcash flows are listed below? (Note: when calculating EAC, you should treat negative cashflows as positive values, and positive cash flows as negative values.) Use i=5%.YearOption 1Option 2-$25,000-$50,0001-$3,000-$7,000-$7,000-$7,0002-$3,0003-$6,0004-$6,000-$8,000-$6,000-$8,000-$8,000-$9,000-$9,000-$9,000-$9,000-$9,0008-$9,0009-$9,00010$5,000$9,000

Answered: 6) What is the Equivalent Annual Cost…

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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2. Discounted Payback (DCPB) and IRR evaluations. Use the cash flow situation (table below) to answer. a. Determine the DCPB based on a MARR rate of 4.0% b. Determine the IRR Year Cash Flow (in $1000's) 0 -1250 1 +350 2 3 +300 +250 4 +200 5 +150 6 +100 7 +50
K (Present value of annuities and complex cash flows) You are given three investment alternatives to analy End of Year 1 5678AWN2 3 A $15,000 15,000 15,000 15,000 15,000 Investment B $15,000 15,000 15,000 15,000 C $20,000 60,000 a. What is the present value of investment A at an annual discount rate of 19 percent? (Round to the nearest cent.) BELEID
A 07. Subject:- finance
Damien offers you a sequence of end-of-year cash flows for an investment as follows: Year 1 2 3 4 4 What is the value of the cash flows if the opportunity cost is 6 percent? (Round to the nearest dollar). Please click on the following link to access a blank worksheet Click to open:: O $8.392 $8.598 Cash Flow $4,000 $3,000 $2,000 $1,000 $8.734 $8.915
s
Consider another set of net cash flows: Year Cash flow 0 1,000 1 1,000 2 0 3 1,500 4 2,000 5 3,500 What is the net present value of the stream if the opportunity cost of capital is 10 percent? a. What is the value of the stream at the end of year 5 if the cash flows are invested in an account that pays 10 percent annually? 2. What cash flows today (time 0), in lieu of the 1,000 cash flow, would be needed to accumulate $10,000 at the end of year 5? (Assume that the cash flows for years 1 through 5 remain the same.)
8. By taking n as 30years and using 6% both as MARR and discount rate, compare the below three possible alternatives by using NPV (net present value) and IRR methods, and recommend the best possible alternative. Types of cashflows Alternatives Alternative A Alternative B Initial capital Annual operation and ETB 40,000 Alternative C ETB 5,000,000 ETB 7,000,000 ETB 11,000,00O ЕТВ 150,000 ЕТВ 100,000 maintenance cost Annual benefit ЕТB 560,000 ЕТB 800,000 ЕТВ 1,050,000
Mendez Company has identified an investment project with the following cash flows. Year Cash Flow 1 2 3 $780 1,050 1,310 1,425 a. If the discount rate is 8 percent, what is the present value of these cash flows? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What is the present value at 17 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. What is the present value at 25 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) a. Present value at 8% b. Present value at 17% c. Present value at 25%
E15
. Year End Cash Flow Alternative A Alternative B 0 -1,000 600 1 600 500 2 600 -2,000 3 600 400 4 600 200 5 -2,100 -1,000 6 700 1,386 a) Solve for the Net Present Value of the alternatives A and B using interest rates from 0% upward b) what are the rate of return of the two alternatives c) If your MARR is 8 percent, which alternatives would you select? Comment briefly on your results. What are some problems associated with the ROR method?
9.
Investment Opportunity Cash Flows in $ 1 3 1,100 $ (500) $ Suppose you are presented with the investment opportunity described in the table above Assume the applicable annual interest rate is 4.75% Calculate the NPV of this investment. Round your answer to two decimals (Do not include the S-sign in your answer, enter negative values with a minus sign and not in parentheses) Year Benefits Costs 2731.16 0 $ $ 350 $ $ (1,100) $ (1,300) $ 2 500 $ (1,500) $ 4 1,500 $ (400) 5 5,000

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