A permanent (life = infinity) project has the following estimates: First cost = -20 M, Annual cost = - 4 M, and Annual revenue = 8 M. At MARR = 10%, the present worth of the project equals: O - 40 M O 2M - 16 M O 20 M

A permanent (life = infinity) project has the following estimates: First cost = -20 M, Annual cost = - 4 M, and Annual revenue = 8 M. At MARR = 10%, the present worth of the project equals: O - 40 M O 2M - 16 M O 20 M

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter11: Capital Budgeting And Risk

Section: Chapter Questions

Problem 14P

See similar textbooks

Related questions

Q: The NPV of a project is $8,000. If the IRR is 12%, which of the following is the required rate of…

A: Solution:- Net Present Value (NPV) means the net value in today’s term after deducting present value…

Q: A project has an investment cost of $200,000 and a profitability index of 1.6. What is the net…

A: Profitability index = PV of cash inflows/PV of cash outflows PV of cash inflows= 1.6 *$ 200000 = $…

Q: Determine the ROR, AW, and PP of the following engineering project when the MARR is 20% per year. Is…

A: Capital budgeting is a process of determining the profitability of different capital projects. With…

Q: A project has an initial cost of $90,400, a life of 9 years, and equal annual cash inflows. The…

A: The term profitability index is used to access the attractiveness of a project. The profitability…

Q: A project has an initial cost of $50,000, expected net cash inflows of $15,000 per year for 7 years,…

A: MIRR stands for modified internal rate of return. It is an improvement over the IRR metric i.e.…

Q: A project has an initial cost of $60,000, expected net cash inflows of $13,000 per year for 7 years,…

A: Here, YearCash flows0 $ -60,000.001 $ 13,000.002 $ 13,000.003 $ 13,000.004 $…

Q: Calculate the NPV of a project under consideration with the following information: project life = 5…

A: NPV stands for Net Present Value. It is a financial metric used to determine the value of an…

Q: A project is estimated to cost P120T, last 8 years & have a salvage value of P20T. The annual gross…

A: Initial cost (C) = P 120000 Salvage value (S) = P 20000 Annual profit (P) = P 40000 - P 6000 = P…

Q: A project that provides annual cash flows of $22,500 for 7 years costs $84,000 today. a. If the…

A: >Capital budgeting entails determining which projects are financially feasible and which are…

Q: A Three-year project with Initial investment: $1,000 Interest rate: 10% The 1st year cash flow: $700…

A: a) Net Present Value is the sum of the present value of all cash inflows and outflows. It can be…

Q: A project with an initial cost of 30800 is expected to provide cash flow of 11,100 11,900, 15000 and…

A: Profitability index is the ratio of present value of cash flow to the initial investment of projects…

Q: A project cost is RO. 30,000 and the expected cash inflows every year is RO. 7000. The total life of…

A: Annual expected Cash Flow 7,000 Initial investment 30,000 Payback…

Q: A project has an initial cost of $50 000, net annual cash inflows of $20 000, and a $2 000 salvage…

A: Rate of return is the return on the profit on investment, It can change the value of investment,…

Q: Suppose that a project requires an initial investment of 20 000 USD at the begynning of year 1. The…

A: Initial investment = $20,000Expected return at the end of 1st year = $25,000Required rate of return…

Q: alculate the capitalized cost of a project that has an initial cost of P3M. The nnual operating cost…

A: Capitalized cost is the present value of all cost that would likely to occur during the life of the…

Q: A project has an initial cost of $40,000, expected net cash inflows of $9,000 per year for 7 years,…

A: Net Present Value: Net Present Value is the difference between the present value of cash inflows and…

Q: A project is estimated to cost P120T, last 8 years & have a salvage value of P20T. The annual gross…

A: Net cost is nothing but the opposite of NPV where cost of an investment exceeds the present value of…

Q: An investment project costs X. It is expected to have an annual net cash flow of 0.125X for 20…

A: The payback period refers to the time required by an investment to cover its initial investment.…

Q: A project has an initial cost of $45,000, expected net cash inflows of $9,000 per year for 10 years,…

A: The MIRR of a project is a metric that assumes that cash flows are reinvested at the cost of capital…

Q: IS $117,000. If the service life is 8 years, what is the incremental internal rate of return?

A: Information Provided: Initial cost (X) = $200,000 Annual generated income (X) = $49,000 Initial cost…

Q: You are considering a project with the following financial data: Required initial investment at n =…

A: The capital budgeting is a technique that helps to analyze the profitability of the project.

Q: N=

A: In this we have to calculate present value of cash flow and from that we can get equivalent annual…

Q: u) Project P rcquires an mvcsiment of $95,000 and is expecled lo pro of $20,000 per year for 8…

A: (a): Payback = initial investment/annual cash flow

Q: You are required to investigate the following project: The initial Investment at n=0 is $100,000.…

A: Project life= 10 years Minimum return on investment=14% Initial costs= $100,000 Annual operating…

Q: Project K has a cost of $52,125, its expected net cash inflows are $22,000 per year for 6 years, and…

A: Note: Since we only answer up to 3 sub-parts, we’ll answer the first 3. Please resubmit the question…

Q: A permanent (life = infinity) project has the following estimates: First cost = -20 M, Annual cost =…

A: Given, First cost=-20M Annual cost=-4M Annual Revenue=8M Net Annual Revenue=8M+(-4M)=4M MARR=10%…

Q: The project’s payback is 1.5 years, and it has a weighted average cost of capital of 10 percent.…

A: WACC = 10% Year Cash Flow 0 1 400 2…

Q: The internal rate of return (IRR) of a certain project is 11 % and the capital investment is…

A: The internal rate of return (IRR) is a capital budgeting metric used to gauge the benefit of…

Q: A project has an initial cost of $40,000, expected net cash inflows of $9,000 per year for 7 years,…

A: Honor code: Since you have posted a question with multiple sub-parts, we will solve the first three…

Q: Determine the B/C ratio for the following project. First Cost = P100, 000 Project life, years = 5…

A: B/C ratio means present value of benefits divided by the Present value of costs. B/C ratio = Present…

Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

A permanent (life = infinity) project has the following estimates: First cost = -20 M, Annual cost
= - 4 M, and Annual revenue = 8 M. At MARR = 10%, the present worth of the project equals:
O - 40 M
2M
О - 16 М
20 М

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

Step 2

Step 3

Step 4

Trending now

This is a popular solution!

Step by step

Solved in 4 steps with 3 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

A permanent (life = infinity) project has the following estimates: First cost = -20 M, Annual cost = - 4 M, and Annual revenue = 8 M. At MARR = 10%, the annual worth of the project equals:
Determine the B/C ratio for the following project.First Cost = P100, 000Project life, years = 5Salvage value = P10, 000Annual benefits = P60, 000Annual O and M = P22, 000Interest rate= 15%
You are required to investigate the following project: The initial Investment at n=0 is $100,000. The project life is 10 years. Estimated annual operating cost : 34,000. The required minimum return on the investment :14%. The salvage value 8,000. What is the minimum annual revenues that should be generated to make the project worthwhile? 97842 52758 81921 45716 O O O O
A project has an initial cost of $50 000, net annual cash inflows of $20 000, and a $2 000 salvage value after five years. Which of the following gives the project's approximate external rate of return (i*) if MARR=10 percent?
Suppose that a project requires an initial investment of 20 000 USD at the begynning of year 1. The project is expected to return 25 000 USD at the end of year 1. The required rate of return for the project is 20%. Calcualte the Net Present Value of the project as well as the Internal Rate of Return.
A project has annual cash flows of €-45,000, €35,700, €15,700 and €5,700. Required: What is the payback period for this project? (Round your answer to 2 decimal places (e.g.. 32.16).) Payback period years
The Profitability Index of a project is 1.28 and its cost of investment is 250000. The NPV of the project is O a. 65000 O b. 75000 c. 70000 O d. 80000
Given a Project with the following data: First (initial) cost = JD 7000; Annual Operating cost= JD 1200; Salvage Value = JD 1500, i-8% per year, and 12 years. To Calculate the Equivalent Single Value (Eq. X) at the end of year 5, we use:
You are assigned to calculate IRR for Sur Project with life of 8 years. You know that for the Sur project NPV @11% is OMR 25816 (positive) while NPV @ 12% is –OMR 5788(negative). The initial investment for this project is OMR 85000.The cost of capital for this project is 11%. What is the IRR (rounded to two decimal places) for the Sur Project? A. 11.82% B. 12.29% C. 12.82% D. 10.18%
A project has an initial cost of $40,000, expected net cash inflows of $9,000 per year for 7 years, and a cost of capital of 11%. a. What is the project’s NPV? (Hint: Begin by constructing a time line) b. What is the project’s IRR? c.what is the project’s payback period?
A project has an initial cost of $40,000, expected net cash inflows of $9,000 per year for 7 years, and a cost of capital of 11%. Requirements: What is the project’s NPV? What is the project’s IRR? What is the project’s PI? What is the project’s payback period? What is the project’s discounted payback period?
Consider the following sets of investment projects: Compute the equivalent annual worth of each project at i = 10%, and determine the acceptability of each project.