A company with a required rate of return of 12 percent is considering a project with an RM40,000 initial investment. The net cash flows are expected to be RM15,000 per year over the four-year-life projects. Determine whether or not this project should be accepted based on internal rate of return techniques. Answer O IRR = 18.46 percent, accept the project IRR > required rate of return 12 percent O IRR = 17.45 percent, reject the project IRR < required rate of return 12 percent O IRR = 18.45 percent, reject the project IRR < required rate of return 12 percent O IRR = 17.45 percent, accept the project IRR > required rate of return 12 percent

A company with a required rate of return of 12 percent is considering a project with an RM40,000 initial investment. The net cash flows are expected to be RM15,000 per year over the four-year-life projects. Determine whether or not this project should be accepted based on internal rate of return techniques. Answer O IRR = 18.46 percent, accept the project IRR > required rate of return 12 percent O IRR = 17.45 percent, reject the project IRR < required rate of return 12 percent O IRR = 18.45 percent, reject the project IRR < required rate of return 12 percent O IRR = 17.45 percent, accept the project IRR > required rate of return 12 percent

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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Pitt Company is considering two alternative Investments. The company requires a 12% return from its Investments. Neither option has a salvage value. Project X Project Y $243,046 $175,883 Initial Investment Net cash flows anticipated: Year 1 Year 2 Year 3 Year 4 Year 5 82,000 60,000 91,000 82,000 75,000 A. Compute the IRR for both projects using the IRR spreadsheet function. Project X Project Y B. Which project should be recommended. Project X ✓ % % 35,000 54,000 73,000 69,000 26,000
Suppose a particular investment project will require an initial cash outlay of $1,400,000 and will generate a cash inflow of $700,000 in each of the next three years. What is the project’s IRR? Suppose a company’s hurdle rate is 20%, should it accept the project? Group of answer choices 20%; accept the project 23%; accept the project 20%; reject the project 23%; reject the project
BATA plc. is considering the following two projects. Only one of which maybe selected. Each project has a required rate of return of 15% for A and 10% for B with the following cash flowsYear Project A Project B0 K (200,000) K (175,000)1 68,700 50,0002 44,500 60,2503 56,500 45,2504 35,500 80,250Required:A. Calculate for each project:Payback period for each of the projects, Net present value for each of the projects and Internal rate of return for each of the projectsB. Explain which project you would recommend for acceptance for each of the three methods and overall. C. Briefly discuss the relative merits of the pay back and net present value methods of evaluation methods mentioned in (a) above
ZLIK Inc is considering methods by which to evaluate a multi-year project that requires a large $55 million investment. Assuming the project has conventional cash flows, under which conditions would the project be an acceptable investment for ZLIK? Select all that apply. A) NPV < 0 B) NPV > 0 C) IRR > firm's required return D) IRR < firm's required return E) Profitability Index > 1.0 F) Profitability Index < 1.0
Assume an investment has cash flows of -$25,200, $7,000, $8,000, $8,500, and $9,000 for Years 0 to 4, respectively. What is the NPV if the required return is 11.1 percent? decimal places, e.g., -32.16.) Should the project be accepted or rejected? (do not round intermediate calculations, enter negative number with a minus sign and round your answer to 2 (write either "accepted" or "rejected")
Use the following information to answer questions 11-15:A firm evaluates a project with the following cash flows. The firm has a 2 year payback period criteria and a required return of 11 percent.Year0 1 2 3 4 5Cash flow (OMR) -24,000 17,000 12,000 9,000 -8,000 11,0001-Whatis the net present value for the project?2-Whatis the payback period for the project?3-what is the discounted payback period for the project? 4-What is the profitability index for the project?5-Given your analysis, should the firm accept or reject the project?
Joliet Company is considering two alternative investments. The company requires an 18% return from its investments. Category Project X Project Y Initial Investment 108,000 $98,000 Net cash flows anticipated: Year 1 36,000 25,000 Year 2 39,000 45,000 Year 3 32,000 42,000 Year 4 34,000 28,000 Year 5 25,000 17,000 Compute the IRR for both Projects and recommend one of them.
A firm evaluates all of its projects by applying the NPV decision rule. A project under consideration has the following cash flows: Year 0 1 2 WN 3 NPV Cash Flow What is the NPV for the project if the required return is 12 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) -$ 29,000 13,000 16,000 12,000 At a required return of 12 percent, should the firm accept this project? NPV Yes O No What is the NPV for the project if the required return is 24 percent? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
JVA corporation is considering investing in a new project with the estimated cash flows shown below. Compute the NPV for the project and recommend whether the firm should accept or reject it. The required cost of capital is 20 percent. Time Cash Flow 0 1 -100 20 -$13.55, reject O$10.26, reject O $1.90, accept. O $11.34, reject 2 52 3 62
A firm evaluates all of its projects by applying the NPV decision rule. A project under consideration has the following cash flows: Year Cash Flow 0 -$27,800 1 11,800 2 3 14,800 10,800 What is the NPV for the project if the required return is 11 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) NPV At a required return of 11 percent, should the firm accept this project? Yes ○ No What is the NPV for the project if the required return is 25 percent? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) NPV
Use the following information to answer questions 11-15: A firm evaluates a project with the following cash flows. The firm has a 2 year payback period criteria and a required return of 17 percent. Year Cash flow (OMR) |-39,000 28,000 19,000 14,000 -12,000 10,000 4 11. What is the net present value for the project?

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