7. A project with a 3-year life has the following probability distributions for possible end-of-year cash flows in each of the next three years:Year 1Prob Cash Flow Prob Cash Flow Prob Cash Flow0.30 $300 0.15100 0.25 $2000.40 500 0.35 200 0.75 800Year 2Year 30.30 700 0.35 6000.15 900Using an interest rate of 8 percent, find the expected present value of theseuncertain cash flows. (Hint: Find the expected cash flow in each year, thenevaluate those cash flows.)a.$1,204.95b.$ 835.42c.$1,519.21d.$1,580.00e$1,347.61

Introduction Expected Present Value of cash flows: Present Value: The mechanism of finding out the…

7. A project with a 3-year life has the following probability distributions for possible end- of-year cash flows in each of the next three years: Year 1 Prob Cash Flow Prob Cash Flow Prob Cash Flow 0.30 $300 0.15100 0.25 $200 0.40 500 0.35 200 Year 2 Year 3 0.75 800 0.30 700 0.35 600 0.15 900 Using an interest rate of 8 percent, find the expected present value of these

7. A project with a 3-year life has the following probability distributions for possible end- of-year cash flows in each of the next three years: Year 1 Prob Cash Flow Prob Cash Flow Prob Cash Flow 0.30 $300 0.15100 0.25 $200 0.40 500 0.35 200 Year 2 Year 3 0.75 800 0.30 700 0.35 600 0.15 900 Using an interest rate of 8 percent, find the expected present value of these

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

An investment, which is worth $57,023.00 and has an expected return of 17.00 percent, is expected to pay fixed annual cash flows forever with the next annual cash flow expected in 1 year. What is the present value of the annual cash flow that is expected in 3 years from today? O $9,693.91 (plus or minus 3 dollars) O $35,603.48 (plus or minus 3 dollars) O $6,052.59 (plus or minus 3 dollars) O $8,285.39 (plus or minus 3 dollars) O none of the answers are within 3 dollars of the correct answer
An investment advisor offers you a product thatwill deliver cash-flows at the end of each of thenext seven years. The first cashflow is $5,000and every year thereafter, the cashflow will growat a rate of 4%. If the annual interest rate is2%, what is the present value of thisopportunity?
Given the following information, calculate the rate of return. price = $501.88time to maturity = 10 yearsannual payment = $100type = ordinary annuity
Determine the annual rate of interest, to the nearest tenth of a percent, given that the investment of $34 500 is compounded monthly and after 6 years is worth $49 750. use tvm solver or graphing calculator N= 1%= PV= PMT= FV= P/Y= C/Y= PMT: END BEGIN
(c) A sum of 10,000 RO is required in 5 yoars from now. An annual sinking fund is to be sot up that will return an interest rate of 6% over this period. What will be the annual sinking fund instalments?
Your required rate of return is 10 percent. If you invest $3,000 today you will receive the following cash flows from year 1 to 4: 2000, 500, 1000, 2000. Calculate the Discounted Payback Period of the project. 3.7 years 3.9 years 3.1 years 3.5 years 3.3 3 years
Assume you invest $5,100 today in an investment that promises to return $6,928 in exactly 10 years. a. Use the present-value technique to estimate the IRR on this investment. b. If a minimum annual return of 9% is required, would you recommend this investment? #69 Part 1 a. The IRR of the investment is enter your response here%. (Round to the nearest whole percent.) Part 2 b. If a minimum return of 9% is required, would you recommend this investment? (Select the best choice below.) A. No, because this investment yields less than the minimum required return of 9%. B. Yes, because a minimum required return of 9% does not compensate for an investment that lasts longer than one year. C. No, because a minimum required return of 9% is an arbitrary choice for an investment of this risk level. D. Yes, because this investment yields more than the minimum required return of 9%
Keith Riggins expects an investment of $125,473.50 to return $15,000 annually for several years. If Riggins earns a return of 10%, how many annual payments will he receive? (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided. Round "Table Factor" to 4 decimal places.) Present Value Annuity Payment = ון Table Factor Annual Payments payments
Thank you for checking.
a. Determine the expected internal rate of return of this project for seven years, using the present value of an annuity of $1 table above. If required, round youP Pinal answer to the nearest whole percent. b. What are some uncertainties that could reduce the internal rate of return of this project?
The company has a project with a 5-year life that requires an initial investment of $200,000, and is expected to yield annual cash flows of $62,500. What is the net present value of the project if the required rate of return is set at 8%? Calculation Steps Present Value of an Annuity of $1 at Compound Interest. Net Present Value = ( $fill in the blank x fill in the blank ) – $fill in the blank Note: Round your answer to the nearest whole dollar. What NPV does the previous calculation yield? $fill in the blank
Consider a stream of cash flows, where you receive $2,000.00 per year for 20 yearsEXCEPT year 12 during which you receive only $1,000.00. If the current market rate ofinterest is 7.200% (compounded annually), then what is the present value of this stream ofuneven cash flows? Hint: there are several ways to solve this problem but see if you cansolve it using a single annuity formula.

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