a) The Coca-Cola Company are looking to go for a project that will require an initial investment of $ 500,000 and an annual expenditure of $ 50,000 from year one till the 5th year and annual expenditure of $ 70,000 from the 6th year till the end of this project. The project will provide revenue of $ 100,000 annually but will decrease by $ 1000 each year till the end. The project has a life time of 10 years. Find out the PEC (present equivalent cost) if the nominal interest rate is 15%. b) If you borrowed $10,000 with a promise to make 10 equal payments starting 1 year from now, calculate the amount of payments if the interest rate were 8% per year compounded weekly?

a) The Coca-Cola Company are looking to go for a project that will require an initial investment of $ 500,000 and an annual expenditure of $ 50,000 from year one till the 5th year and annual expenditure of $ 70,000 from the 6th year till the end of this project. The project will provide revenue of $ 100,000 annually but will decrease by $ 1000 each year till the end. The project has a life time of 10 years. Find out the PEC (present equivalent cost) if the nominal interest rate is 15%. b) If you borrowed $10,000 with a promise to make 10 equal payments starting 1 year from now, calculate the amount of payments if the interest rate were 8% per year compounded weekly?

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 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
Winview Clinic is evaluating a project that costs $52,125 and has expected net cash inflows of $12,000 per year for eight years. The first inflow occurs one year after the cost outflows, and the project has a cost of capital of 12%. b. What is the project's NPV? Its IRR? Its MIRR?
Giant Equipment Ltd. is considering two projects to invest next year. Both projects have the same start-up costs. Project A will produce annual cash flows of $42,000 at the beginning of each year for eight years. Project B will produce cash flows of $48,000 at the end of each year for seven years. The company requires a 12% return. Required: Which project should the company select if the interest rate is 14% at the cash flows in Project B is also at the beginning of each year?
You are analyzing a project with 5-year life. The project requires a capital investment of $74,000 now, and it will generate uniform annual revenue of $44,400 at the end of each year. Further, the project will have a salvage value of $14,800 at the end of the fifth year and it will require $17,760 each year for the operation. What is the net value of the project using year 4 as the basis, considering a 12% annual interest rate.
LePew Cosmetics is evaluating a new fragrance-mixing machine. The machine requires an initial investment of $360000 and will generate cash inflows of $63450 per year for 8 years. If the cost of capital is 14%, calculate the net present value (NPV) and indicate whether to accept or reject the machine. The NPV of the project is $__________
You are considering the following project. What is the NPV of the project? WACC of the project: 0.10 Revenue growth rate: 0.05 Tax rate: 0.40 Revenue for year 1: 13,000 Fixed costs for year 1: 3,000 variable costs (% of revenue): 0.30 project life: 3 years Economic life of equipment: 3 years Cost of equipment: 20,000 Salvage value of equipment: 4,000 Initial investment in net working capital: 2,000
A company has to make a decision about expanding its production facilities. Research indicates that the desired expansion would require an immediate outlay of $130,000 and an outlay of a further $20,000 in 3 years. The net cash returns are shown below. Find the net present value of the project. According to the net present value criterion, should the expansion project be undertaken if the required rate of return is 10%? Year 1 to Year 8 Year 9 to Year 12 $22,000 per year $18,000 per year The net present value of the expansion project is $ (Round the final answer to the nearest dollar as needed. Round all intermediate values to six decimal places as needed.)
You wish to evaluate a project requiring a $60,100 initial investment and having a useful life of seven years. What minimum annual cash inflow do you need if the cost of capital is 8.2%? If the project earns $12,900 per year, what is its IRR? Is the project acceptable? The minimum annual cash inflow necessary is $ (Round to the nearest cent.)
Management of Sunland Home Furnishings is considering acquiring a new machine that can create customized window treatments. The equipment will cost $266,550 and will generate cash flows of $81,750 over each of the next six years. If the cost of capital is 15 percent, what is the MIRR on this project? - MMR = ? %
Jasmine Manufacturing is considering a project that will require an initial investment of $53,700 and is expected to generate future cash flows of $10,100 for years 1 through 3, $8,400 for years 4 and 5, and $2,200 for years 6 through 10. What is the payback period for this project? years
Project Beta is a project which will last for 7 years and which requires an initial outlay of $3,000. This outlay will be depreciated using straight-line depreciation over the life of the project. It will generate incremental revenue of $1200 per year. The value of incremental, after-tax earnings is $400 per year. The project will require Net Working Capital equal to 10% of incremental revenue. What is the value of incremental free cash flow in Year 0? Question 5Answer a. $-3120 b. $2880 c. $-2880 d. $3120
Carla Vista Company is considering a long-term investment project called ZIP. ZIP will require an investment of $118,665. It will have a useful life of 4 years and no salvage value. Annual cash inflows would increase by $81,000, and annual cash outflows would increase by $40,500. The company's required rate of return is 12%. Click here to view the factor table. Calculate the internal rate of return on this project. (Round answers to whole number (e.g., 15%).) Internal rate of return on this project is between Determine whether this project should be accepted? % and %. The project should be accepted.

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