All techniques Rieger International is evaluating the feasibility of investing $115,000 in a piece of equipment that has a 5-year life. The firm has estimated the cashinflows associated with the proposal as shown in the following table: The firm has a cost of capital of 9%.a. Calculate the payback period for the proposed investment.b. Calculate the net present value (NPV) for the proposed investment.c. Calculate the probability index for the proposed investment.d. Calculate the internal rate of return (IRR) for the proposed investment.a. The payback period of the proposed investment is years. (Round to two decimal places.)b. The NPV of the proposed investment is $ (Round to the nearest cent.)c. The probability index of the proposed investment is(Round to two decimal places)d. The IRR of the proposed investmentData table(Click on the icon here in order to copy the contents of the data table belowa spreadsheet.)Year (0)Cash inflows (CF₁)$30,0002$20,000$40,000O$40,000$40,0003455:52Next

Payback Period: It is the period in which the investment or project returns back its initial cost…

a. The payback period of the proposed investment is years. (Round to two decimal places.) b. The NPV of the proposed investment is $ (Round to the nearest cent.) c. The probability index of the proposed investment is (Round to two decimal places)

a. The payback period of the proposed investment is years. (Round to two decimal places.) b. The NPV of the proposed investment is $ (Round to the nearest cent.) c. The probability index of the proposed investment is (Round to two decimal places)

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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Suppose you have a project that has a 0.4 chance of tripling your investment in a year and a 0.6 chance of halving your investment in a year. What is the standard deviation of the rate of return on this investment? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places.) What is the standard deviation?
Average Rate of Return, Cash Payback Period, Net Present Value Method for a Service Company Spanish Peaks Railroad Inc. is considering acquiring equipment at a cost of $288,000. The equipment has an estimated life of 10 years and no residual value. It is expected to provide yearly net cash flows of $36,000. The company's minimum desired rate of return for net present value analysis is 12%. Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 1.833 1.736 1.690 1.626 1.528 3 2.673 2.487 2.402 2.283 2.106 4 3.465 3.170 3.037 2.855 2.589 5 4.212 3.791 3.605 3.353 2.991 6 4.917 4.355 4.111 3.785 3.326 7 5.582 4.868 4.564 4.160 3.605 8 6.210 5.335 4.968 4.487 3.837 9 6.802 5.759 5.328 4.772 4.031 10 7.360 6.145 5.650 5.019 4.192 Compute the following: a. The average rate of return, giving effect to straight-line depreciation on the investment. If required, round your answer to one decimal place. 8 X %
Approximately, what is the value of PG (present worth of arithmetic gradient) if G=185, n=7 years, and i= 7.5% per year?
When an investment’s annual net cash inflows are equal every year, the investment’s payback period can be calculated as: (See your Chapter 25 notes, page 2) When an investment’s annual net cash inflows are equal every year, the investment’s payback period can be calculated as: (See your Chapter 25 notes, page 2) Initial cost of the investment minus the annual net cash inflow Average amount of the investment divided by the average annual net income Initial cost of the investment divided by the annual net cash inflow Present value of net cash inflow divided by the initial cost of the investment Future value of net cash inflow divided by the initial cost of the investment Present value of the net cash inflow minus the initial cost of the investment Annual net cash inflow minus the initial cost of the investment Average annual net income divided by the average amount of the investment
A real estate investment has the following expected cash flows: Year Cash Flows 1 $14,000 2 19,000 3 19,000 4 25,000 The discount rate is 3 percent. What is the investment’s present value? Round your answer to 2 decimal places
Consider an EOY geometric gradient, which lasts for eight years, whose initialvalue at EOY one is $250,000 and f = 6% per year thereafter. Find the equivalentuniform gradient amount over the same period if the initial value of the cash flowsat the end of year one is $200,000. Answer the following questions to determinethe value of the gradient amount, G. The interest rate is 8% per year.
Consider an investment project, which behaves according to the cash flow (in local currency) below, as well as the respective inflations for the period. In view of the above and knowing that the capital cost of the project is 15% per year, it is requested: a) The values of NPV and IRR b) A graphical sketch of NPVs versus interest rates c) Decision on the feasibility of the project regarding the IRR and NPV indicators Anos = years Fluxo de caixa = cash flow Taxa de inflação do período = period inflation rate
(Present value of an uneven stream of payments) You are given three investment alternatives to analyze. The cash flows from these three investments are shown in the popup window: Assuming a discount rate of 16 percent, find the present value of each investment. a. What is the present value of investment A at 16 percent annual, discount rate? S (Round to the nearest cènt.) Data table (Click on the following icon in order to copy its contents into a spreadsheet.) INVESTMENT B END OF YEAR 1 23456TBLG 7 8 9 10 A $18,000 18,000 18,000 18,000 18,000 $18,000 18,000 18,000 18,000 18,000 18,000 C $18,000 90,000 18,000 -
Suppose the term structure of risk-free interest rates is as shown here: a. Calculate the present value of an investment that pays $1,000 in 2 years and $4,000 in 5 years for certain. b. Calculate the present value of receiving $900 per year, with certainty, at the end of the next 5 years. To find the rates for the missing years in the table, linearly interpolate between the years for which you do know the rates. (For example, the rate in year 4 would be the average rate in year 3 and year 5.) c. Calculate the present value of receiving $2,700 per year, with certainty, for the next 20 years. Infer rates for the missing years using linear interpolation. (Hint: Use a spreadsheet.) Data table (Click on the following icon in order to copy its contents into a spreadsheet.) 2 years 3 years 5 years 7 years 1 year 2.06 2.44 2.64 3.22 3.74 Term Rate (EAR, %) Print Done 10 years 4.25 20 years 5.09 I X t cent.)
Jones expects an immediate investment of $73,759.50 to return $15,000 annually for six years, with the first payment to be received one year from now. What rate of interest must Jones eam? (PV of $1. EV of $1. PVA of $1. and EVA of $1) (Use appropriate factor(s) from the tables provided. Round "Table Factor" to 4 decimal places.) Table Factor Interest Rate Present Value Annuity Payment
An investment will pay $600 at the end of each of the next 2 years, $700 at the end of Year 3, and $1,000 at the end of Year 4. What is its present value if other investments of equal risk earn 6 percent annually? a. $1,821.82 b. $1,913.83 c. $2,297.07 d. $2,479.86 e. $2,735.85
The present worth of income from an investment that follows an arithmetic gradient was projected to be $9500. If the income in year 1 is expected to be $1200, how much would the gradient have to be in each year, through year 7 if the interest rate is 10% per year? Select one: O a. 765 O b. 491 O c. 153 O d. 287 O e. 513

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