11. Uneven cash flowsA series of cash flows may not always necessarily be an annuity. Cash flows can also be uneven and variable in amount, but the concept of the timevalue of money will continue to apply.Consider the following case:The Purple Lion Beverage Company expects the following cash flows from its manufacturing plant in Palau over the next six years:Year 1$400,000Year 2$37,500O $1,979,094O $917,500Annual Cash FlowsYear 3$480,000Year 4$450,000O $2,292,500O $1,775,000Year 5The CFO of the company believes that an appropriate annual interest rate on this investment is 4%. What is the present value of this uneven cash flowstream, rounded to the nearest whole dollar?$550,000Year 6$375,000

NPV is also known as Net Present Value. It is a capital budgeting techniques which help in decision…

A series of cash flows may not always necessarily be an annuity. Cash flows can also be uneven and variable in amount, but the concept of the time value of money will continue to apply. Consider the following case: The Purple Lion Beverage Company expects the following cash flows from its manufacturing plant in Palau over the next six years: Annual Cash Flows Year 3 Year 4 Year 1 Year 2 $400,000 $37,500 $480,000 $450,000 The CFO of the company believes that an appropriate annual interest rate on this investment is 4%. What is the present value of this uneven cash flow stream, rounded to the nearest whole dollar? $1,979,094 $917,500 Year 5 Year 6 $550,000 $375,000 $2,292,500 $1,775,000

A series of cash flows may not always necessarily be an annuity. Cash flows can also be uneven and variable in amount, but the concept of the time value of money will continue to apply. Consider the following case: The Purple Lion Beverage Company expects the following cash flows from its manufacturing plant in Palau over the next six years: Annual Cash Flows Year 3 Year 4 Year 1 Year 2 $400,000 $37,500 $480,000 $450,000 The CFO of the company believes that an appropriate annual interest rate on this investment is 4%. What is the present value of this uneven cash flow stream, rounded to the nearest whole dollar? $1,979,094 $917,500 Year 5 Year 6 $550,000 $375,000 $2,292,500 $1,775,000

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

See similar textbooks

Similar questions

The manager of a production system expects to spend $100,000 the first year with amounts increasing by $10,000 each year. Income is expected to be $400,000 the first year, increasing by $50,000 each year. a) Draw cash flow diagrams of expenditures and income separately over a 5 year period at an interest rate of 10% per year. b) Detemine the present worth of the company's net cash flow (present worth expenditure). Please write fomula and show your solution step by step. Use compound interest tables. = present income- present
1. If the investment is expected to earn revenue of P4,000,000, with cash expenses amounting to P1,500,000 each over its life, What is the payback period in years? 2. If the investment is expected to earn increase revenue by P750,000 annually with cash savings on expenses of P120,000 each over its life, what is the accounting rate of return of this investment?
A new company estimates that by investing in a new process, it will increase its sales by $2 million one and half year from now and a further $1.5 million two year from now. Assume interest rate of 18% per year, compounded semiannually. Please write formula, use compound interest table for extracting factors, show your solution step by step. a) Draw cash flow diagram What is the maximum amount the company can afford to spend now on the new process in order to break b) even? Compare PP and CP and use first method (determine effective rate per compounding period).
HSJ Foods is getting ready to produce a new line of products by investing 185000 OMR. The investment will result in additional cash flows of 52500 OMR , 81250, and 120000 over the next three years. What is the payback period for this project? Select one: a. 1.53 years b. 1.84 years c. 2.62 years d. None of these e. 2.42 years
Alonso Yards Corp. is considering an investment opportunity with the following expected net cash inflows: Alonso Yards Corp. Year 1 $203,000 Year 2 $185,000 Year 3 $106,000 The company uses a discount rate of 9%, and the initial investment of $380,000. Calculate the NPV of the investment.
Attach a complete solution. Draw the cash flow diagram.Suppose that P 4500 is deposited each year into a bank account that pays 8% interest compounded quarterly. How much would be accumulated in his fund by the end of the 4th year? The first payment occurs at time zero (now).
Munabhai
You may attempt this question 2 more times for credit. A firm has invested $700 in a new machine that is expected to last for the next 4 years. The machine will be depreciated on a straight line basis down to zero by the end of its 4 year life. The firm projects that the machine will generate consecutive annual cash inflows of $700 beginning in one year and will generate consecutive annual cash outflows at 290 also beginning in one year.. Assuming the tax rate of 33%, determine the firm's cash flow next year. Place your answer to dollars and cents. Do not include a dollar sign or a comma in your answer.
The Purple Lion Beverage Company expects the following cash flows from its manufacturing plant in Palau over the next five years: Year 1 $250,000 Annual Cash Flows Year 2 $20,000 Year 3 Year 4 $180,000 $450,000 Year 5 $550,000 The CFO of the company believes that an appropriate annual interest rate on this investment is 4%. What is the present value of this uneven cash flow stream, rounded to the nearest whole dollar?
P.nilesh

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS