Amount desired at end of period $6,000 Length of time 8 years Rate 3% Compounded Semiannually On PV Table 12.3- Period used ?, Rate Used? PV factor used ? PV of amount desired at end of period ? Period used 24 Rate Used 1.5% PV factor used 0.6995 PV of amount desired at end of period $4,197 Period used 8 Rate Used 3% PV factor used 0.7894, PV of amount desired at end of period $6,728 None of the above Period used 4 Rate Used 12% PV factor used O.6830 PV of amount desired at end of period $4,098.00 Period used 16, Rate Used 1.5%, PV factor used 0.7880, PV of amount desired at end of period $4,728

Amount desired at end of period $6,000 Length of time 8 years Rate 3% Compounded Semiannually On PV Table 12.3- Period used ?, Rate Used? PV factor used ? PV of amount desired at end of period ? Period used 24 Rate Used 1.5% PV factor used 0.6995 PV of amount desired at end of period $4,197 Period used 8 Rate Used 3% PV factor used 0.7894, PV of amount desired at end of period $6,728 None of the above Period used 4 Rate Used 12% PV factor used O.6830 PV of amount desired at end of period $4,098.00 Period used 16, Rate Used 1.5%, PV factor used 0.7880, PV of amount desired at end of period $4,728

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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3. What if Nguyen Hospital wants to know why IRR is not being used for the investment analysis? Calculate the IRR for each project. Round the discount factor to three decimal places. Round the IRR to the nearest whole percentage value (for example, 10.6% rounds to 11% and should be entered as "11" in the answer box.) Clearlook: Goodview: Discount factor IRR 16 16 % % Why IRR is not suitable for choosing among these mutually exclusive investments. IRR does not reveal the absolute dollar contribution that each project makes
Cash Flow Asset End of year Amount Appropirate Requried Retrun A 1 $5,000 18% 2 $5,000 3 $5,000 Using cell references to the given datea and the PV function, calculate the value of asset A.
NPV profiles WACC (Dollars in Millions) Plan A Plan B Project NPV Calculations: NPVA NPVB Project IRR Calculations: IRRA IRRB NPV Profiles: Discount Rates 0% 5% 10% 15% 20% 22% 25% 11.00% NPVA $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 0 -$40.00 Formulas #N/A #N/A -$11.00 $2.47 $2.47 $2.47 #N/A #N/A NPVB 1 $6.39 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 2 3 $6.39 $6.39 4 $6.39 $2.47 5 6 7 $6.39 $6.39 $6.39 $2.47 $2.47 8 9 $6.39 $6.39 $2.47 $2.47 $2.47 10 $6.39 $2.47 11 $6.39 12 $6.39 13 $6.39 $2.47 $2.47 $2.47 14 $6.39 15 $6.39 $2.47 $2.47 16 $6.39 $6.39 $2.47 17 39 $2.47
Year 0 Cash Flow = +$25,000 (assume only 1 change in signs) Project IRR = 4.5% Project DR = 6.0% %3D Should the project be accepted without reviewing NPV? Why or why not? Explain
The parents of a 3-year old child decide they need to start saving for their child's college fund. They want to have $22,000 in the fund in 15 years. The fund has an APR of 3.4%. What monthly deposit is required? Round your answer to the nearest cent.
Project X has an initial cost of $46,919, and its expected net cash inflows are $11,500 per year for 6 years. The firm has a WACC of 8 percent, and Project X's risk would be similar to that of the firm's existing assets. Calculate the discounted payback period of Project X. 5.14 years |
PV Versus Internal Rate of Return Nguyen Hospital is considering two different low-field MRI systems: the Clearlook System and the Goodview System. The projected annual revenues, annual costs, capital outlays, and project life for each system (in after-tax cash flows) are as follows: Clearlook Goodview Annual revenues $720,000 $900,000 Annual operating costs 445,000 655,000 System investment 900,000 800,000 Project life 5 years 5 years Assume that the cost of capital for the company is 8 percent. The present value tables provided in Exhibit 19B.1 and Exhibit 19B.2 must be used to solve the following problems. Required: 1. Calculate the NPV for the Clearlook System - $198075 2. Calculate the NPV for the Goodview System - $178285 Which MRI system would be chosen -Clearlook System 3. What if Nguyen Hospital wants to know why IRR is not being used for the investment analysis? Calculate the IRR for each project. Round the discount factor to three decimal places. Round…
Present and future values of 1 at 11% are presented below. PV of $1 FV of $1 PVA of $1 FVA of $1 1 0.90090 1.11000 0.90090 1.0000 2.1100 2 0.81162 1.23210 1.71252 2.44371 3.3421 3 0.73119 1.36763 4 0.65873 1.51807 0.59345 1.68506 3.10245 4.7097 5 3.69590 6.2278 6 0.53464 1.87041 4.23054 7.9129 Polo Publishers purchased a multi-color offset press with terms of $50,000 to be paid at the date of purchase, and a noninterest-bearing note requiring payment of $20,000 at the end of each year for five years. The interest rate implicit in the purchase contract is 11%. Polo would record the asset at: Multiple Choice $73,918. $123.918 Present and future values of 1 at 11% are presented below. PV of $1 FV of $1 PVA of $1 FVA of $1 0.90090 1.11000 0.90090 1.0000 1 1 2 2 0.81162 1.23210 1.71252 2.1100 3 0.73119 1.36763 2.44371 3.3421 4 0.65873 1.51807 3.10245 4.7097 5 0.59345 1.68506 3.69590 6.2278 7.9129 6 0.53464 1.87041 4.23054 Polo Publishers purchased a multi-color offset press with terms of…
NOT GRADED Excess Present Value Index and Average Rate of ReturnHighpoint Company is evaluating five different capital expenditure proposals. The company's hurdle rate for net present value analyses is 12%. A 10% salvage value is expected from each of the investments. Information on the five proposals is as follows: Proposal Required Investment PV at 12% of After-Tax Cash Flows Avg. Annual Net Income from Investment A $265,000 $305,030 $37,400 B 195,000 231,780 26,000 C 155,000 168,040 19,200 D 175,000 211,300 27,600 E 123,000 131,990 14,960 a. Compute the excess present value index for each of the five proposals.Round answers to three decimal places. Proposal Excess PV Index A Answer B Answer C Answer D Answer E Answer b. Compute the average rate of return for each of the five proposals.Round answers to one decimal place. For example, 0.4567 equals 45.7% Proposal Avg. Rate of Return A Answer B Answer C…
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Determine feasibility of the project using FW Method. Use MARR = 10%. Alternatives А B C D Capital investment -$150,000 -$85,000 -$75,000 -$120,000 Annual revenues $28,000 $16,000 $15,000 $22,000 Annual expenses -$1,000 -$550 -$500 -S700 Market Value (EOL) $20,000 $10,000 $6,000 $11,000 Life (years) 10 10 10 10 Round off your answer to the NEAREST WHOLE NUMBER Ex. 12345 FW of Alt. A is Blank 1 FW of Alt. B is Blank 2 FW of Alt. C is Blank 3 FW of Alt. D is Blank 4

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