All techniques Rieger International is evaluating the feasibility of investing $87,000 in a piece of equipment that has a 5-year life. The firm has estimated the cash inflows associated with the proposal as shown in the following table: The firm has a cost of capital of 8%. a. Calculate the payback period for the proposed investment. b. Calculate the discounted payback period for the proposed investment. c. Calculate the net present value (NPV) for the proposed investment. d. Calculate the probability index for the proposed investment. e. Calculate the internal rate of return (IRR) for the proposed investment. . f. Calculate the modified internal rate of return (MIRR) for the proposed investment. g. Evaluate the acceptability of the proposed investment using NPV, IRR, and MIRR Data table - - X

All techniques Rieger International is evaluating the feasibility of investing $87,000 in a piece of equipment that has a 5-year life. The firm has estimated the cash inflows associated with the proposal as shown in the following table: The firm has a cost of capital of 8%. a. Calculate the payback period for the proposed investment. b. Calculate the discounted payback period for the proposed investment. c. Calculate the net present value (NPV) for the proposed investment. d. Calculate the probability index for the proposed investment. e. Calculate the internal rate of return (IRR) for the proposed investment. . f. Calculate the modified internal rate of return (MIRR) for the proposed investment. g. Evaluate the acceptability of the proposed investment using NPV, IRR, and MIRR Data table - - X

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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Assume a company is going to make an investment of $300,000 in a machine and the following are the cash flows that two different products would bring in years one through four. The company's required rate of return is 12%. What is the NPV for Option A? What is the NPV for Option B? What is the IRR for Option A? What is the IRR for Option B? PLEASE NOTE #1: The dollar amounts will be with "$" and commas as needed and rounded to two decimal places (i.e. $12,345.67). Round your IRR answers, in percentage format, to two decimal places (i.e. 12.34%). Given the above answers, which project should the company invest in? Project . PLEASE NOTE #2: Your answer is either "A" or "B" - capital letter, no quotes.
Blue Llama Mining Company is analyzing a project that requires an initial investment of $3,225,000. The project’s expected cash flows are: Year Cash Flow Year 1 $325,000 Year 2 –100,000 Year 3 425,000 Year 4 500,000 1. Blue Llama Mining Company’s WACC is 7%, and the project has the same risk as the firm’s average project. Calculate this project’s modified internal rate of return (MIRR): 17.53% -20.06% 22.14% 16.61% 2. If Blue Llama Mining Company’s managers select projects based on the MIRR criterion, they should accept or reject this independent project. 3. Which of the following statements about the relationship between the IRR and the MIRR is correct? A typical firm’s IRR will be equal to its MIRR. A typical firm’s IRR will be less than its MIRR. A typical firm’s IRR will be greater than its MIRR.
a
c. A company is planning to invest in a project over a 5-year period, but wants to know its financial implications. It expects the cash in-flow return on the investment to steadily increase over the 5 years. Using the information below, help determine the Total Net Cash Flows, the Net Present Value and the estimated Payback Period. Note: Estimate the payback period to the nearest year. Discount Rate 12% Investment Project Initial Investment Year 1 Year 2 Year 3 Year 4 Year 5 Cash Flow $ $ $ $ $ $ Total Net Cash Flow (5,000) 800 ? 900 ? 1,500 ? 1,800 ? 3,200 NPV of investment Estimated Payback Period
Payback, NPV, and IRR Rieger International is evaluating the feasibility of investing $87,000 in a piece of equipment that has a 5-year life. The firm has estimated the cash inflows associated with the proposal as shown in the following table: E. The firm has a 9% cost of сapital. a. Calculate the payback period for the proposed investment. b. Calculate the net present value (NPV) for the proposed investment. c. Calculate the internal rate of return (IRR), rounded to the nearest whole percent, for the proposed investment. d. Evaluate the acceptability of the proposed investment using NPV and IRR. What recommendation would you make relative to implementation of the project? ..... 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 IRR of the proposed investment is %. (Round to two decimal places.) d. Should Rieger International accept or reject the proposed investment?…
| All techniques Rieger International is evaluating the feasibility of investing $109,000 in a piece of equipment that has a 5-year life. The firm has estimated the cash inflows associated with the proposal as shown in the following table: firm has a cost of capital of 11%. The a. Calculate the payback period for the proposed investment. b. Calculate the discounted payback period for the proposed investment. c. Calculate the net present value (NPV) for the proposed investment. d. Calculate the probability index for the proposed investment. e. Calculate the internal rate of return (IRR) for 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 (t) 1 GAW N 2 3 4 5 Print Cash inflows (CF₂) $35,000 $20,000 $30,000 $35,000 $40,000 Done X ces.)

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