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 ca inflows 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 investment Data table (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) Year (0) Cash inflows (CF) $30,000 $20,000 $40,000 $40,000 $40,000 12345 5:52 Next

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 ca inflows 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 investment Data table (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) Year (0) Cash inflows (CF) $30,000 $20,000 $40,000 $40,000 $40,000 12345 5:52 Next

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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Yokam Company is considering two alternative projects. Project 1 requires an initial investment of $420,000 and has a present value of all its cash flows of $1,350,000. Project 2 requires an initial investment of $5 million and has a present value of all its cash flows of $6 million. (a) Compute the profitability index for each project.(b) Based on the profitability index, which project should the company select?
The Basalt Corporation is considering a new venture. Management has made the following cash flow estimates for the project over the next three years under assumptions reflecting best, worst, and most likely scenarios in each year. The expected initial outlay (C0) is $1,000, and the cost of capital is 12%. The following probability distribution for best, worst and most likely conditions is constant from year to year: Worst case - C1 = $200 C2 = $300 C3 = $400 Most likely - C1 = $300 C2 = $400 C3 = $500 Best Case - C1 = $400 C2 = $500 C3 = $600 Best case 25% Most likely case 50% Worst case 25% Calculate the NPVs of the overall best, most likely, and worst case scenarios and the probability of each.
Use the NPV method to determine whether Rouse Products should invest in the following projects: • Project A costs $270,000 and offers seven annual net cash inflows of $64,000. Rouse Products requires an annual return of 14% on projects like A. • Project B costs $395,000 and offers ten annual net cash inflows of $72,000. Rouse Products demands an annual return of 12% ch investments of this nature. (Click the icon to view the present value annuity table.) (Click the icon to view the present value table.) (Click the icon to view the future value annuity table.) (Click the icon to view the future value table.) Requirement What is the NPV of each project? What is the maximum acceptable price to pay for each project? Calculate the NPV of each project. (Round your answers to the nearest whole dollar. Use parentheses or a minus sign for negative net present values.) The NPV of Project A is
Use the NPV method to determine whether Stenback Products should invest in the following projects: Project A: Costs $260,000 and offers eight annual net cash inflows of $54,000. Stenback Products requires an annual return of 14% on investments of this nature. Project B: Costs $395,000 and offers 10 annual net cash inflows of $77,000. Stenback Products demands an annual return of 12% on investments of this nature. (Click the icon to view Present Value of $1 table.) (Click the icon to view Present Value of Ordinary Annuity of $1 table.) Read the requirements. Requirement 1. What is the NPV of each project? Assume neither project has a residual value. Round to two decimal places. (Enter any factor amounts to three decimal places, X.XXX. Use parentheses or a minus sign for a negative net present value.) Caclulate the NPV (net present value) of each project. Begin by calculating the NPV of Project A Net Cash Inflow Project A: Years 1-8 0 Present value of annuity Investment Net present value…
Compute the net present value of this investment.
Assume you are the finance manager of Almanor Company, and the company is considering investing in one of the three projects. The life for both the Projects X, M and Project Y is 5 years. Project X costs OMR. 20500, Project M costs OMR. 20500 and Project Y costs OMR.20500. The discount rate/cost of capital is 4.15%. Required: Use the following techniques to help company to decide which Machine is better and justify why? a) Payback period b) Discount payback period c) Net Present Value d) Present value index -Profitability index. Year Project X Project M Project Y 7865 3748 8752 4567 7609 8393 3. 9676 4628 4508 7292 8905 7836 9904 0066 8287 (Ctrl) - 45
Yokam Company is considering two alternative projects. Project 1 requires an initial investment of $400,000 and has a present value of cash flows of $1,100,000. Project 2 requires an initial investment of $4,000,000 and has a present value of cash flows of $6,000,000. 1. Compute the profitability index for each project. 2. Based on the profitability index, which project should the company prefer? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Compute the profitability index for each project. Project 1 Project 2 Choose Numerator: Profitability Index T 7 Choose Denominator: 4 of 5 180 # Next > G O
Connor Corporation is considering two projects (see below). For your analysis, assume these projects are mutually exclusive with a required rate of return of 12%. project 1 project 2 initial investment $(510,000) $(685,000) cash flow year 1 485,000 610,000 Compute the following for each project: NPV (net present value) PI (profitability index) IRR (internal rate of return) Based on your analysis, answer the following questions : Which is the best choice? Why? Which project should be selected and why? If the projects had the same IRR amounts but different NPV totals, then how would you know which project to select? Explain.
Assume you are the finance manager of Methanol Company, and the company is considering investing in one of the two projects. The life for both the Projects X and Project Y is 6 years. Project X costs OMR. 20500 and Project Y costs OMR.20500. The discount rate/cost of capital is 3.55%. Required: Use the following techniques to help company to decide which Machine is better and justify why? a) Payback period b) Discount payback period c) Net Present Value d) Present value index -Profitability index.
1.Assuming you are facing with making a decision on a large capital investment proposal. the capital investment amount is $ Estimated the study period is years .The annual revenue at the end of each year is $ and the estimated annual year-end expense is $ starting in year Assuming a market value at the end year is $ and the benchmark rate is 10%, please answer the following questions: 1.Please design this investment project to fill the proper number in blank space to let the project is feasible in economics( 2.To give the cash flow chart of the project(
I need to know the Cash payback period for each project, the Net present value, the annual rate of return for each project and finally I need the projects ranked best to worse (1, 2, 3) on their cashpayback, net present value, and annual return. Finally I need to know which is the best project. Question 1 of 1 > E Pharoah Company is considering three long-term capital investment proposals. Each investment has a useful life of 5 years. Relevant data on each project are as follows. Project Bono Project Edge Project Clayton Capital investment $172,000 $182,000 $202,000 Annual net income: Year 1 14,700 18,900 28,350 2 14,700 17,850 24,150 3 14,700 16,800 22,050 4 14,700 12.600 13,650 5 14,700 9,450 12,600 5 14,700 9,450 12,600 Total $73,500 $75,600 $100,800 Depreciation is computed by the straight-line method with no salvage value. The company's cost of capital is 15%. (Assume that cash flows occur evenly throughout the year.)
Consider the following project balance profiles for proposed investment projects. Statement 1-For Project A, the cash now at the end of year 2 is $100.Statement 2-For Project C, its net future worth at the end of year 2 is $150.Statement 3-For Project B, the interest rate used is 25%.Statement 4-For Project A, the rate of return should be greater than 15%.Which of the statement(s) above is (are) correct?(a) Just Statements 1 and 2(b) Just Statements 2 and 3(c) Just Statements 1 and 3( d) Just Statements 2, 3, and 4

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