A project with the following costs are under consideration to determine its profitability. Using the IRR comparison, and an annual MARR of 10% compounded semiannually.determine if the project should be executed.First cost: $51,300Semiannual operating cost : $10,000Semiannual income: $20,000: $20,,000: 4 yearsSalvage valueLife in yearsO a. IRR = 15% semiannualO b. IRR 15.83% semiannualO c. IRR 16.9% semiannualO d. IRR 18.7% semiannual

To determine if the project should be executed, we need to calculate the Internal Rate of Return…

Answered: A project with the following costs are…

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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You are given the following forecasted data about a project: • Project life = 3 years • Required investment $1,200,000 • Salvage value = $200,000 Depreciation method = straight-line depreciation • Unit price = $140 • First year's demand = 100,000 units Annual demand growth rate 5% Unit variable cost $80 Annual fixed cost = $10,000 • Income tax rate = 40% • MARR = 10% Suppose the key variable is identified here to be the unit variable cost. This variable's most likely value is $80 (as indicated above), but what would happen to the NPW if it were $90 instead? The change in the NPW values (new NPW - original NPW) is closest to: -$1,563,110.44 $1,563,110.44 -$1,875,732.53 $1,875,732.53
Chapter 8 #3 On January 1, M.B. University had an endowment worth $100 million. Of this amount, $25 million was invested in treasury bills, and $75 million was invested in the market portfolio. By the following December 31, MBU had earned $2 million in interest and had received dividends of $3 million. These amounts were considered as income and used to pay the current expenses of the university. Except for rolling over treasury bills, no portfolio transactions were undertaken. Although on December 31, MBU’s portfolio still held the same number of shares in the market portfolio, the market value of these shares had declined to $60 million because of a general decline in stock prices. What was the expected annual rate of return on MBU’s portfolio on January 1 and its standard deviation? What was the actual rate of return earned?
Using the table in Exercise 10, calculate the net present value for each project shown below at the end of six years and determine which would be the better decision for Mike’s Camping Supply. Assume that Project 1 can be sold for $15,000 at the end of the sixth year. Project 1 Project Cost $160,000 Cost $150,000 Minimum desired rate of return 12% Minimum desired rate of return 12% Expected useful life 7 years Expected useful life 6 years Yearly cash flows to be received: Yearly cash flows to be received: Year 1…
A firm is considering three mutually exclusive alternatives as part of an upgrade to an existing transportation network. If the MARR is 10% per year, which alternative (if any) should be chosen using the IRR analysis procedure? Use trial & error and show your calculations. A B Initial Cost Annual Revenue Annual Cost Salvage Value Useful Life 40,000 10,400 4,000 3,000 30,000 8,560 3,000 2,500 20,000 7,750 2,500 2,000 20 20 10
Required information [The following information applies to the questions displayed below.] Project Y requires a $331,500 investment for new machinery with a five-year life and no salvage value. The project yields the following annual results. Cash flows occur evenly within each year. (PV of $1. EV of $1. PVA of $1. and FVA of $1) Note: Use appropriate factor(s) from the tables provided. Annual Amounts Sales of new product Expenses Project Y Materials, labor, and overhead (except depreciation) Depreciation-Machinery Selling, general, and administrative expenses Income 3. Compute Project Y's accounting rate of return. Numerator: Accounting Rate of Return Denominator: Project Y $ 400,000 179,200 66,300 29,000 $ 125,500 Accounting Rate of Return
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Use Annual Cost Analysis to determine whether Alternative A or B should be chosen. The analysis period is 5 years. Assume an interest rate of 6% per year, compounded annually Alternative A Alternative B 1800 150 400 5 Initial Cost Annual Benefit Salvage Value Useful Life (yrs) 4230 340 2100 O Alternative B should be chosen, because its annual benefit is higher than Alternative A's Alternative A should be chosen, because its initial cost is lower than Alternative B's O Alternative B should be chosen, because its equivalent annual cost is $85.30 higher than Alternative A's Alternative A should be chosen, because its equivalent annual cost is $85.30 lower than Alternative B's
Projects A and B have first costs of $5,000 and $9,000 respectively. Project A has net annual benefits of $2,500 during each year of its 5-year useful life, after which it can be replaced identically. • Project B has net annual benefits of $3,300 during each year of its 10-year life. Use present worth analysis, an interest rate of 30% per year, and a 10-year analysis period to determine which project to select. Project A Project B
For the three mutually exclusive alternatives below, use a MARR of 15% per year to select the best alternative using (a.) rate of return analysis and (b.) Aw analysis on the actual cash flow estimates with MARR=15%.
Using (incremental) benefit-cost ratio analysis OR (incremental) internal rate of return, determine which of the following three mutually exclusive alternatives should be selected. Each alternative has a 6-year useful life. Assume the MARR is 6%. First Cost Uniform Annual Benefit Salvage Value $560 $140 $40 A $340 $100 0 B $125 $40 0 C
expense of $500. Consider a yearly Two machines are evaluated for a new project, consider a yearly interest rate of 6% and the information described in the following table. Determine EUAC for both alternatives and determine the best option. Purchase cost Salvage value Duration Machine A Machine B $10,000 $15,000 $1,250 $1,950 5 years 10 years 11 13 L

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