a company considering opening all store store will cost 100 million TL to build, and the present value of the expected cash flows from the store is 120 million TL. Further assume that by opening this store, the company will have the chance to expand into a much larger store any time over the next 5 years. The cost of expansion will be 200 million TL, and it will be undertaken only if the present value of the expected cash flows exceeds 200 million TL. At the moment, the present value of the expected cash flows from the expansion is believed to be only 150 million. The variance is 0.08, 5-year risk-free rate is 6%. What would be the strategic NPV? O 14.53 TL

a company considering opening all store store will cost 100 million TL to build, and the present value of the expected cash flows from the store is 120 million TL. Further assume that by opening this store, the company will have the chance to expand into a much larger store any time over the next 5 years. The cost of expansion will be 200 million TL, and it will be undertaken only if the present value of the expected cash flows exceeds 200 million TL. At the moment, the present value of the expected cash flows from the expansion is believed to be only 150 million. The variance is 0.08, 5-year risk-free rate is 6%. What would be the strategic NPV? O 14.53 TL

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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The UniMAP Holdings Group is considering investing RM10.0 million in a new shopping complex in Kangar, Perlis. The group has estimated that the shopping complex once built, will contribute RM1,250,000 per year for 10 years. The board of trustees of the group require that any new investment to be undertaken by the group should generate a required rate of return (MARR) of at least 12% per year of its investment. Assuming that at the end of 10 years period the shopping complex will retain about 60% of its initial investment as a salvage value. What should be the decision of the group on this proposed asset investment?
Semarak Enterprises is considering a new three-year expansion project and is looking closely at investing in a new machine. The project will require an investment in a new production machine for an invoice price of RM2 million, and it would cost an additional RM320,000 to properly install the machine. To properly operate the machine, inventory must be increased by RM250,000. To purchase the new machine, the firm would have to borrow RM500,000 at 5% interest rate from Private Bank resulting in additional interest payment of RM25,000 per year. The machine will be depreciated straight-line to zero over its three-year tax life, after which time it will be sold for RM180,000. The company also hired a marketing firm to analyse the market at a cost of RM15,000. An extract of the marketing report is as follow: -The project is estimated to generate RM1.735 million in annual sales, with costs ofRM650,000. -The required return on the project is 12 percent and the tax rate is 21 %.
OpenSeas, Inc. is evaluating the purchase of a new cruise ship. The ship will cost $501 million and will operate for 20 years. OpenSeas expects annual cash flows from operating the ship to be $70.7 million and its cost of capital is 12.0%. a. Prepare an NPV profile of the purchase. b. Identify the IRR on the graph. c. Should OpenSeas go ahead with the purchase? d. How far off could OpenSeas's cost of capital estimate be before your purchase decision would change? SITTE a. Prepare an NPV profile of the purchase. To plot the NPV profile, we compute the NPV of the project for various discount rates and plot the curve. The NPV for a discount rate of 2.0% is $ million. (Round to one decimal place.)
Brunette Company is contemplating investing in a new piece of manufacturing machinery. The amount to be invested is $180,000. The present value of the future cash flows generated by the project is $163,000. Should they invest in this project? Oa. yes, because the rate of return on the project is equal to the desired rate of return used to calculate the present value of the future cash flows Ob. no, because net present value is +$17,000 Oc. no, because the rate of return on the project is less than the desired rate of return used to calculate the present value of the future cash flows Od. yes, because the rate of return on the project exceeds the desired rate of return used to calculate the present value of the future cash flows
Ivy's Ice Cream is looking at an opportunity that would require an investment of $900,000 today. The investment will provide cash flows of $250,000 in the first year, $400,000 in the second year, and $600,000 in the third year. If the interest rate is 8%, what is the NPV of this investment opportunity? Should Ivy's Ice Cream move forward with this investment based on the NPV? (Round your answer to the nearest whole dollar.)
When McDonalds consider the new store, the management know that KFC might also considering opening a new store at the same place. McDonalds predicts that the future cash flow will be 630,000 with probability 50% if KFC does not open a new store, and 210,000 with probability 50% if KFC does. Should McDonalds undertakes the project?
Vishano
What is the net present value of the flier project, which is a 3-year project where Dispersion would spread fliers all over Fairfax? The project would involve an initial investment in equipment of $232,000.00 today. To finance the project, Dispersion would borrow $232,000.00. The firm would receive $232,000.00 from the bank today and would pay the bank $294,695.40 in 3 years (consisting of an interest payment of $62,695.40 and a principal payment of $232,000.00). Cash flows from capital spending would be $0.00 in year 1, $0.00 in year 2, and $30,500.00 in year 3. Operating cash flows are expected to be $144,900.00 in year 1, $99,400.00 in year 2, and -$28,200.00 in year 3. The cash flow effects from the change in net working capital are expected to be -$8,310.00 at time 0; -$21,700.00 in year 1; $12,100.00 in year 2, and $16,900.00 in year 3. The tax rate is 35.00 percent. The cost of capital is 7.45 percent and the interest rate on the loan would be 8.03 percent. -$13,600.79 (plus or…
A company has to make a decision about expanding its production facilities. Research indicates that the desired expansion would require an immediate outlay of $130,000 and an outlay of a further $20,000 in 3 years. The net cash returns are shown below. Find the net present value of the project. According to the net present value criterion, should the expansion project be undertaken if the required rate of return is 10%? Year 1 to Year 8 Year 9 to Year 12 $22,000 per year $18,000 per year The net present value of the expansion project is $ (Round the final answer to the nearest dollar as needed. Round all intermediate values to six decimal places as needed.)
You are considering investing in a glove manufacturing plant for which you need to immediately pay RM10 million. You expect to produce and sell 10,000 gloves per year. Production commences after 12 months, i.e, at the end of year 1 (which is also the begining of Year 2). You expect production cost to be RM50 per glove. Selling price is estimated at RM100 per glove for the first three years of sales. You are not sure about the sales price after Year 3 because your exclusive patent right expired then. The plant facilities last for 8 years. Cost of capital is 8%. Compute the glove's sales price after Year 3. and this project's NPV Don't you think the price after year 3 is the same as the marginal cost, since at optimum level of output, marginal revenue=marginal cost?
The restaurant chain company ESTIASI Limited is considering the case of investing in a new restaurant which requires an initial cost of € 120,000. Cash inflows for the first two years are expected to be € 40,000, in the third year to increase to € 46,000 and in the fourth year to € 50,000. The annual capital cost of the company is 6%. Calculate the Net Present Value (CVA) of the investment
OpenSeas, Inc. is evaluating the purchase of a new cruise ship. The ship will cost $499 million and will operate for 20 years. Open Seas expects annual cash flows from operating the ship to be $70.5 million and its cost of capital is 12.2%. a. Prepare an NPV profile of the purchase. b. Identify the IRR on the graph. c. Should OpenSeas go ahead with the purchase? d. How far off could OpenSeas's cost of capital estimate be before your purchase decision would change? a. Prepare an NPV profile of the purchase. To plot the NPV profile, we compute the NPV of the project for various discount rates and plot the curve. The NPV for a discount rate of 2.0% is $ million. (Round to one decimal place.)

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