A company's weighted average cost of capital is 9.4% per year. A project requires an investment of $15,000 today and it is expected to generate after-tax cash flows of $9,000 at the end of year 1, $5,000 at the end of year 2, and $4,000 at the end of year 3. What is the project's annual modified internal rate of return (MIRR)? A) 9.8% B) 10.5% C) 12.3% D) 11.4% E) 8.9%

A company's weighted average cost of capital is 9.4% per year. A project requires an investment of $15,000 today and it is expected to generate after-tax cash flows of $9,000 at the end of year 1, $5,000 at the end of year 2, and $4,000 at the end of year 3. What is the project's annual modified internal rate of return (MIRR)? A) 9.8% B) 10.5% C) 12.3% D) 11.4% E) 8.9%

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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Question 3: A project requires an immediate investment of $150,000 and another maintenance expenditure of $30,000every two years starting two years from now. What is the minimum annual income the project should generate starting one year from now for 4 years to satisfy a minimum attractive rate of return (MARR) of 12%? (Provide a cash flow diagram).
An investment costs $4,000 today. This investment is expected to produce annual cash flows of $1,200, $1,400, $ 1,300 and $1,100, respectively, over the next four years. What is the internal rate of return (IRR) ( or geometric average) on this investment? Question 23 options: 2.43 % 6.25 % 9.72% 31.25%
2. Internal rate of return (IRR) Aa Aa The internal rate of return (IRR) refers to the compound annual rate of return that a project generates based on its up-front cost and subsequent cash flows. Consider the case of Blue Llama Mining Company: Consider the following case: Blue Llama Mining Company is evaluating a proposed capital budgeting project (project Sigma) that will require an initial investment of $850,000. Blue Llama Mining Company has been basing capital budgeting decisions on a project's NPV; however, its new CFO wants to start using the IRR method for capital budgeting decisions. The CFO says that the IRR is a better method because returns in percentage form are easier to understand and compare to required returns. Blue Llama Mining Company's WACC is 8%, and project Sigma has the same risk as the firm's average project The project is expected to generate the following net cash flows: Which of the following is the correct calculation of project Cash Flow Year Sigma's IRR?…
Baghiben
The expected profits from a $165,000 investment are $55,000 in Year 1, $80,000 in Year 2, and $120,000 in Year 3. What is the investment’s payback period?
What is the internal rate of return of a capital investment project that has the followingafter-tax cash flows for a company that requires a 15% rate of return on the project?Time Cash Flow0 -$4,0001 5002 2,000 3 5,000
A proposed project is expected to increase accounts receivable by $25,000, decrease inventory by $8,000 and increase accounts payable by $16,000. What is the project's initial requirement for net working capital? Select one: a. +$17,000 b. $1000 c. -$9,000 d. +$9,000
A project requires an increase in inventories, accounts payable, and accounts receivable of $120,000, $50,000, and $80,000, respectively. If opportunity cost of capital is 9% and the project has a life of 13 years, and the working capital investments will be recovered at the end of the life of the project, what is the effect on the NPV of the project? Enter your answer rounded to two decimal places. Enter your response below. Number
NPV and EVA A project cost $2.3 million up front and will generate cash flows in perpetuity of $220,000. The firm's cost of capital is 9%. a. Calculate the project's NPV. b. Calculate the annual EVA in a typical year. c. Calculate the overall project EVA. a. The project's NPV is $ (Round to the nearest dollar.)
A project’s annual revenues will be $50,000 the first year and will decrease by $1500 per year over its 20-year life. If the firm’s interest rate is 12%, what is the project’s present worth? (a) $305,998 (b) $373,450 (c) $384,654 (d) $440,902.
Revenues generated by a new fad product are forecast as follows: Year Revenues 1 $50,000 2 35,000 3 30,000 4 20,000 Thereafter 0 Expenses are expected to be 40% of revenues, and working capital required in each year is expected to be 20% of revenues in the following year. The product requires an immediate investment of $60,000 in plant and equipment. a. What is the initial investment in the product? Remember working capital. b. If the plant and equipment are depreciated over 4 years to a salvage value of zero using straight-line depreciation, and the firm’s tax rate is 20%, what are the project cash flows in each year? Assume the plant and equipment are worthless at the end of 4 years. c. If the opportunity cost of capital is 10%, what is the project's NPV? d. What is the project IRR?
Problem 2 please.

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