6. Consider the decision tree below. Find its expected NPV. The cost of capital is 9.0%. Year a. b. C. d. e. 0 -$1,000,000 $156,967 $172,664 $189,931 $208,924 $229,816 *** 1 80% -$100,000 20% $0 2 3 4 60% $800,000 $800,000 $800,000|| 40% $500,000 $500,000 $500,000

6. Consider the decision tree below. Find its expected NPV. The cost of capital is 9.0%. Year a. b. C. d. e. 0 -$1,000,000 $156,967 $172,664 $189,931 $208,924 $229,816 *** 1 80% -$100,000 20% $0 2 3 4 60% $800,000 $800,000 $800,000|| 40% $500,000 $500,000 $500,000

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

See similar textbooks

Similar questions

Compute the NPV for Project X with the cash flows shown as follows if the appropriate cost of capital is 9 percent. Time: 1 2 3. 4 Cash flow: -1,000 -75 100 100 2,000 Multiple Choice $486.29 -$639.96 $392.44 $360.04 MacBook Air
6. The following graph shows the NPV of a project as a function of the cost of capital. Your actual cost of capital is 12%. a. What is the IRR of the project? b. Should you take the project? Explain. Net Present Value 150,000 100,000 50,000 0% 10% 20% 30% 40% (50,000) (100,000) Cost of Capital I 50%
14. Given the following sequential decision tree, determine which is the optimal investment, A or B. 4D 5300,000 (-$20,000) se0,000 Investment A (-570.000) ●S75.000 O 70 20 5000,000 (-517.000) $70,000 I 15 35 $105,000 (-వని రింి0) 65 $40,000 Investment U (-850,000) 355.000 15. Jay Seago is suing the manufacturer of his car for $3.5 million because of a defect that he believes caused him to have an accident. The accident kept him to TL amont oEC700000of 8/2 31/8
Compute the NPV for Project X with the cash flows shown as follows if the appropriate cost of capital is 9 percent. Time 0 1 2 3 4 5 Cash Flow −$ 5,000 $ 1,000 $ 2,000 $ 2,000 $ 500 $ 500 Multiple Choice −$2,013.18 −$175.66 $486.29 $9,824.34
The Ham Company is analyzing new capital investments.Projects X Y and Z. Each project has a cost of X = $6,500, Y = $5,400, and Z = $4,560 and the raterequired for each is 13%.The expected flows are as follows.Year X Y Z1 $1,500.00 $2,300.00 $2,800.002 $2,000.00 $2,600.00 $1,900.003 $3,000.00 $2,700.00 $1,500.00Which project should be accepted?Calculate the IRR, NPV and PaybackIf you can send me the excel by email: 0229275@up.edu.mx
Compute the NPV statistic for Project U given the following cash flows if the appropriate cost of capital is 9 percent. Project U Time 0 1 2 3 4 5 Cash Flow –$ 1,000 $ 350 $ 1,480 –$ 520 $ 400 –$ 100
Compute the NPV for Project X with the cash flows shown below if the appropriate cost of capital is 10 percent. Time: 0 1 2 3 4 5 Cash flow: -125 -125 0 200 175 150 Multiple Choice $162.01 $124.29 $112.99 $362.93
4. Consider the investment projects given in the following table. n 0 1 2 Project 1 - $1,500 $700 $2,500 Net Cash Flow Project 2 - $5,000 $7,500 $600 Project 3 -$2,200 $1,600 $2,000 Assume that MARR=15% and a financing rate of 12%. a. Compute the IRR for each project. b. On the basis of the IRR criterion, if the three projects are mutually exclusive investments, which project should be selected?
The following are the cash flows of two projects: Year Project A Project B 0 $ (380) $ (380) 1 210 280 2 210 280 3 210 280 Training If the opportunity cost of capital is 11%, what is the profitability index for each project?
A project has the cash flows shown in the following table. If the cost of capital is 9%, what is the NPV of the project? Year 0 1 2 3 4 5 6 Incremental Free Cash Flow -913 281 281 281 281 281 191 Question 5Answer a. $294 b. $272 c. $312 d. $325
The Ewert Exploration Company is considering two mutually exclusive plans for extracting oil on property for which it has mineral rights. Both plans call for the expenditure of $10.5 million to drill development wells. Under Plan A, all the oil will be extracted in 1 year, producing a cash flow at t = 1 of $13.5 million; under Plan B, cash flows will be $2 million per year for 20 years. a. What are the annual incremental cash flows that will be available to Ewert Exploration if it undertakes Plan B rather than Plan A? (Hint: Subtract Plan A's flows from B's.) Enter your answers in millions. For example, an answer of $1.23 million should be entered as 1.23, not 1,230,000. Round your answers to two decimal places. Use a minus sign to enter cash outflows, if any. Year Incremental Cash Flow (B - A) 1 $ $ million million 2-20 b. If the company accepts Plan A and then invests the extra cash generated at the end of Year 1, what rate of return (reinvestment rate) would cause the cash flows…
Consider an investment with the following cash flows: Year Cashflows PV of P 1 @ 14% 0 (P 31,000) 1.000 1 10,000 .877 2 20,000 .770 3 10,000 .675 4 10,000 .592 Salvage value 5,000 The cost of capital is 14%. What is the profitability index (PI)? a. 1.842 b. 1.824 c. 1.482 d. 1.284

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS