Assume a firm takes on a project that requires an initial investment in year 0 of $42,000. assume that the project creates a NOPAT of $4,900 in year 1. If the weighted average cost of capital for this project is 10% what's the EVA for this project for year 1?

Assume a firm takes on a project that requires an initial investment in year 0 of $42,000. assume that the project creates a NOPAT of $4,900 in year 1. If the weighted average cost of capital for this project is 10% what's the EVA for this project for year 1?

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

See similar textbooks

Related questions

Q: NPV and IRR Benson Designs has prepared the following estimates for a long-term project it is…

A: GIVEN, initial investment = $9670 years = 5 after tax cashflow = $3000 r= 8%

Q: 6. The following graph shows the NPV of a project as a function of the cost of capital. Your actual…

A: IRR is internal rate of return and is break even rate at which net present value is zero and present…

Q: ATL International evaluates capital projects using the net present value, internal rate of return,…

A: Part 2: Explanation:Step 1: Calculate NPV using the formula:\[ NPV = \sum \left( \frac{CF_t}{(1 +…

Q: Assuming you are facing making a decision on a large capital investment proposal. the capital…

A: To find the answers, we will first have organize the cashflows associated with the project. Please…

Q: NPV and IRR Benson Designs has prepared the following estimates for a long-term project it is…

A: If NPV of project is positive, Project must be accepted.If NPV of project is negative, Project must…

Q: he Ham Company is analyzing new capital investments. Projects X Y and Z. Each project has a cost of…

A: For determining a project’s financial feasibility, we often use capital budgeting tools. The…

Q: A business has £18 million available for capital investment in the current year, but has the…

A: Here, To Find: Profitability Index (PI) and ranking =?

Q: Given the initial investment in a factory processing equipment as Ghc500,037. Let the opportunity…

A: Cash flow after tax (1-5) = 115000 Cash flow after tax (6) = 65000 Cash flow after tax (7) =…

Q: a-1. What is the payback period on each project? (Do not round intermediate calculations. Round your…

A: Payback Period: It is the period in which an investment or project recovers its initial cost. The…

Q: Compute the payback statistic for Project X and recommend whether the firm should accept or reject…

A: Payback period - It represents the time period required for recovery of the initial investment in…

Q: A firm evaluates all of its projects by applying the NPV decision rule. A project under…

A: In the given case, we have provided the cash outflow at Year 0 and the expected cash inflows from…

Q: Consider an investment project with the cash flows given in the table below. Compute the IRR for…

A: The Internal Rate of Return (IRR) is a financial measure determining the discount rate at which the…

Q: A firm is considering the following projects. Its opportunity cost of capital is 9%. Cash Flows, $ 1…

A: “Since you have posted a question with multiple sub-parts, we will solve first three sub-parts for…

Q: Compute the Payback statistic for the following project and indicate whether the firm should accept…

A: As the cost of capital is provided here we will use the 'discounted pay back' approach.

Q: A firm is evaluating a proposal which has an initial investment of R250 000 and has cash flows of…

A: The time it takes to repay the cost of an investment is referred to as the payback period. It is…

Q: Project S has a cost of OMR 15,000 and is expected to produce benefits (cash flows) of OMR 4,000 per…

A: This method of Net Present Value (NPV) uses a specified discount rate to bring all subsequent net…

Q: Suppose you're presented with a proposal for a project that costs $4,300 and will bring in $20,200…

A: Net present value is the most important method of capital budgeting based on time value of money and…

Q: You are considering the following two projects and can take only one. Your cost of capital is 11.2%.…

A: Net present value and internal rate of return are the modern methods of capital budgeting that are…

Q: A firm is considering a project that is expected to generate daily cash flows of $26,000 for the…

A: Step 1Given informationStep 2Step 3 : Step 4

Q: NPV and IRR Benson Designs has prepared the following estimates for a long-term project it is…

A: NPV is the difference between the sum of the present values of all future cash inflows and the sum…

Q: A project costs $2.5 million up front and will generate cash flows in perpetuity of $240,000. The…

A: Project cost = $2.5 million Cash flows in perpetuity = $240,000 Cost of Capital = 9%

Q: Find the modified internal rate of return (MIRR) for a proposed project costing $5,489. Assume that…

A: MIRR stands for Modified Internal Rate of Return. It is a financial metric used in capital budgeting…

Q: The firm considers a project which requires an immediate investment of $100, and generates cashflows…

A: When making decision regarding investment there various type of criteria that are being used and…

Q: The Ham Company is analyzing new capital investments. Projects X Y and Z. Each project has a cost of…

A: Capital budgeting is the process by which a company makes decisions about investments in long-term…

Q: What is the profitability index of a project that costs $87 and returns $42 annually for 8 years if…

A: Introduction Profitability Index As the word states, PI(Profitability index measures the ratio…

Q: a. What is the IRR of each project? b. What is the NPV of each project at your cost of capital? c.…

A: Net present value and internal rate of return are the modern methods of capital budgeting that are…

Q: NPV Calculate the net present value (NPV) for a 15-year project with an initial investment of…

A: In this question, we are required to determine the Net Present Value (NPV).

Q: A project requires a $100,000 investment and is expected to generate the following cash flows in the…

A: Step 1: Given Value for Calculation Initial Investment = i = $100,000Cash Flow for Year 1 = cf1 =…

Q: A project is estimated to cost P120T, last 8 years & have a salvage value of P20T. The annual gross…

A: Here, Initial investment = P 120,000 Time period = 8 years Salvage value = P 20,000 Annual income =…

Q: Suppose ABC Telecom Inc.’s CFO is evaluating a project with the following cash inflows. She does not…

A: NPV of the project is $366,572. Computation of NPV: Excel spread sheet:

Q: Lily Company is considering investing P8,000,000 in a project, for a required return of 9%. The…

A: The payback period indicates the time period under which the initial investment or initial outlay is…

Q: The internal rate of return (IRR) is the discount rate that results in a net present value (NPV) of…

A: According to rule, because you have posted multiple questions, we will answer the First question…

Q: Consider a project with an initial investment (today, t = 0) of $225,000. This project will generate…

A: Profitability index is an important capital budgeting tool. This tool is often used to rank…

Q: NPV and IRR Benson Designs has prepared the following estimates for a long-term project it is…

A: Formula for NPV : NPV = Initial Investment + C1/(1+r) + C2/(1+r)^2 + C3/(1+r)^3 + ......... +…

Q: A project has a cash flow of ($1,327,500) at time 0, $280,000 in year 1, $310,000 in year 2,…

A: The discounted payback period provides a more realistic assessment of the profitability of the…

Q: Consider the following two investment alternatives: The firm's MARR is known to be 15%.(a) Compute…

A: IRR is a tool for making investment decisions. It measures whether an investment is profitable or…

Q: A firm evaluates all of its projects by applying the IRR rule. A project under consideration has the…

A: We have given cash flow of 4 years, By using IRR formula in excel we found IRR is, IRR = 15.53 %…

Q: You are assigned to calculate IRR for Sur Project with life of 8 years. You know that for the Sur…

A: Internal rate of return is one of the capital budgeting techniques. It is defined as the discount…

Q: Find the NPV of a project that costs $694,000 today and generates expected cash flows in each of the…

A: NPV is also known as Net Present Value. It is a capital budgeting techniques which help in decision…

Question

Video Video

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Trending now

This is a popular solution!

Step by step

Solved in 1 steps

SEE SOLUTION Check out a sample Q&A here

Similar questions

A project requires an increase in inventories, accounts payable, and accounts receivable of $130,000, $95,000, and $65,000, respectively. If opportunity cost of capital is 4% and the project has a life of 14 years, and the working capital investments will be recovered at the end of the life of the project, what is the effect on the NPV of the project? Enter your answer rounded to two decimal places. Enter your response below. Number
A project has an initial outlay of $2,182. It has a single payoff at the end of year 9 of $6,947. What is the net present value (NPV) of the project if the company’s cost of capital is 10.20 percent?
You are asked to evaluate two projects X and Y. The cash flow for each is listed below. The firmAc€?cs cost of capital is 12%. Year X Y 0 (10,000) (10,000) 1 6,500 3,500 2 3,000 3,500 3 3,000 3,500 4 1,000 3,500 Calculate the NPV of each project? [rounded to the nearest tens] Which project would you select? c) Compute the IRR for project X. [up to two decimal places] Based on the IRR criterion, should project X be accepted? Compute the IRR for project Y. [up to two decimal places] Based on the IRR criterion, should project Y be accepted?
A project is estimated to cost P120T, last 8 years & have a salvage value of P20T. The annual gross income is expected to average P40k & annual expenses is P6T. If capital is earning 12% determine if this a desirable investment using rate of return, what is ROR. a. 20.07% b. 21.7% c. 19.77% d. 20.77%
Compute the payback statistic for Project Y and recommend whether the firm should accept or reject the project with the cash flows shown as follows if the appropriate cost of capital is 11 percent and the maximum allowable payback is one year. Time: 0 1 2 3 4 5 Cash flow: −100 75 100 300 75 200
Shannon Industries is considering a project which has the following cash flows: Year Cash Flow 0 ? 1 $2,000 2 3,000 3 3,000 4 1,500 The project has a payback of 2.5 years. The firm's cost of capital is 12 percent. What is the project's net present value NPV? Round it to a whole dollar, e.g., 1234.
Consider the following projects, X and Y where the firm can only choose one. Project X costs $1500 and has cash flows of $678, $652, $347, $111, $54, $16 in each of the next 6 years. Project Y also costs $1500, and generates cash flows of $738, $693, $405 for the next 3 years, respectively. WACC=11%.Calculate the projects’ NPVs, IRRs, payback periods.
Calculate the capitalized cost of a project that has an initial cost of P3M. The annual operating cost will be P100,000 at the end of every year for the first five years and P160,000 thereafter. Assume i=15%.
A company is considering to invest in two capital expenditures project. The expected future cash flows of the projects are given below: Project A Project B £ £ Initial Outlay (350,000) (300,000) Cash flow Year 1 250,000 200,000 Cash flow Year 2 260,000 210,000 Each project can be undertaken only once. The cost of capital of the company is 10%. Required Calculate the Net Present Value (NPV) of Project A and Project B.
Judson's cost of capital is 12%, what is the project's NPV? Year Cash Flow in $ 0 ($1000) 1 400 2 400 3 600
XYZ is evaluating a project that would last for 3 years. The project's cost of capital is 15.60 percent, its NPV is $43,200.00 and the expected cash flows are presented in the table. What is X? Years from today 0 1 2 3 Expected Cash Flow (in $) -55,800 71,000 -15,900 X O An amount less than $43,200.00 or an amount greater than $82,666.00 O An amount equal to or greater than $70,205.00 but less than $82,666.00 O An amount equal to or greater than $60,505.00 but less than $70,205.00 O An amount equal to or greater than $53,257.00 but less than $60,505.00 O An amount equal to or greater than $43,200,00 but less than $53,257.00 M
Suppose an opportunity arises to invest $10 million that will pay $5.5 million at the end of year 1 and $6.5 million at the end of year two. The cost of capital is 10%. Find NPV. Is the project a go? Show and explain Suppose the project’s cash flows are delayed a year, but not the outlay. How does that change your answer? Show and explain Suppose there is a cost overrun of 20%. The cash flows and their timing are the same as in part a. How does this change your answer? Show and explain. Suppose the second-year cash flow decreases to $5 million. The outlay and timing of the cash flows are the same as in part a. How does this change your answer? Show and explain. Evaluate the proposal. Would you undertake it?

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS