A project in NU will cost $200,000 for planning. and $40,000 in cach of the next six years. It is expected to generate $40,000 revenues per year permanently. Additional revenues will be gained in the pattern of an arithmetic gradient with $20,000 in the first year, declining by $4,000 per year to zero in the sixth year. What is the Rate of Return of this project?

A project in NU will cost $200,000 for planning. and $40,000 in cach of the next six years. It is expected to generate $40,000 revenues per year permanently. Additional revenues will be gained in the pattern of an arithmetic gradient with $20,000 in the first year, declining by $4,000 per year to zero in the sixth year. What is the Rate of Return of this project?

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 company XYZ is deciding whether or not to on a new project with an initial cost of 5.5 MM$. Net cash inflows are expected to be 9 MM$ for each of the first five years of operations. In the sixth year, the abandonment cost of the project is 35 MM$. a. Develop and plot the NPV profile for the projectb. Should the project be accepted at a rate of return of 8%? Should it be accepted at a rate of return of 15%? c. What is the project GRR if the available reinvestment rate is 8%? What if the rate is 15%?
Consider a project with an initial investment (today, t = 0) of $225,000. This project will generate cash flows of $68,750 per year for the next 6 years. The company will pay $50,000 to another for clean-up and disposal in Year 6. What is the Profitability Index (PI) of the project if shareholders demand 8.25% return? Answer in whole numbers, rounded to three decimal places.
(Payback period, net present value, profitability index, and internal rate of return calculations) You are considering a project with an initial cash outlay of $72,000 and expected cash flows of $20,880 at the end of each year for six years. The discount rate for this project is 10.8 percent. a. What are the project's payback and discounted payback periods? b. What is the project's NPV? c. What is the project's PI? d. What is the project's IRR? a. The payback period of the project is years. (Round to two decimal places.)
Colin is analyzing a 3-year project that has an initial cost of $199,800. This cost will be depreciated straight-line to zero over three years. The projected annual net income for the three years is $11,600, $15,900, and $17,200. If the discount rate is 12 percent, what is the average accounting rate of return?
A project is expected to generate the following cash flows: $1 million in one year, $3.7 million in two years, $4 million in three years and $4,3 million in four years. The cash flow is then expected to remain constant (54 3 million per year) in perpetuity. How much are you willing to invest in the project today if you want the project to have an internal Rate of Return (IRR) of 15% ?
Find the rate of return (IRR) on a project that will cost $200,000 today and $400,000 in 4 years from today, BUT will return $100,000 at the end of every year for 10 years. ..
(Paybackperiod, NPV, PI, and IRR calculations) You are considering a project with an initial cash outlay of $80,000 and expected free cash flows of $26,000 at the end of each year for 6 years. The required rate of return for this project is 7 percent. a. What is the project's payback period? b. What is the project's NPV? c. What is the project's PI? d. What is the project's IRR?
An investment project provides cash inflows of $ 608 per year for 5 years. What is the NPV of the project if the initial cost is $ 1,028 , assuming a 11.1 percent required rate of return?
A project whose machinery and installation cost $15,000, promises a net stream of savings of $3,000 per year and has an expected life of 6 years. The companies required rate of return is 5%. What is the NPV of the project. What is the internal rate of return?
You are evaluating a project that will cost $502,000, but is expected to produce cash flows of $127,000 per year for 10 years, with the first cash flow in one year. Your cost of capital is 10.7% and your company's preferred payback period is three years or less. a. What is the payback period of this project? b. Should you take the project if you want to increase the value of the company? a. What is the payback period of this project? The payback period is years. (Round to two decimal places.) b. Should you take the project if you want to increase the value of the company? (Select from the drop-down menus.) If you want to increase the value of the company you take the project since the NPV is will not will
The firm considers a project which requires an immediate investment of $100, and generates cashflows in the amount of $70 at the end of each of the next three years. Hurdle rate = 16%. What is the project’s NPV?
A project requires an initial investment of $60 million and will then generate the same cash flow every year for 7 years. The project has an internal rate of return of 16% and a cost of capital of 10%. 1. What is the project's NPV (in $ million)?

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