Assuming infinite replication and a cost of capital of 10.5 percent, determine the net present value of this project using the Equivalent Annual Annuity approach. Year Cash Flow O ($5,000.00) $2,000.00 $1.600.00 $1,400.00 4 $1,200.00 5 $1,000.00 1 $1,250 $1,450 $1,066

Assuming infinite replication and a cost of capital of 10.5 percent, determine the net present value of this project using the Equivalent Annual Annuity approach. Year Cash Flow O ($5,000.00) $2,000.00 $1.600.00 $1,400.00 4 $1,200.00 5 $1,000.00 1 $1,250 $1,450 $1,066

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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A project is estimated to cost $496,798 and provide annual net cash flows of $89,000 for seven years. 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 Determine the internal rate of return for this project, using the Present Value of an Annuity of $1 at Compound Interest table shown above
Compute the discounted payback statistic for Project C if the appropriate cost of capital is 8 percent and the maximum allowable discounted payback period is three years. (Do not round intermediate calculations and round your final answer to 2 decimal places.) Project C Time: 0 1 2 3 4 5 Cash flow: –$1,000 $480 $480 $520 $300 $100
Net Present Value Method and Internal Rate of Return Method for a service company Keystone Healthcare Corp. is proposing to spend $139,360 on a six-year project that has estimated net cash flows of $32,000 for each of the six years. 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 3.352 2.991 6 4.917 4.355 4.111 3.784 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 a. Compute the net present value, using a rate of return of 12%. Use the table of present value of an annuity of $1 presented above. If required, round to the nearest dollar. Use the minus sign to indicate a negative net present value. Present value of annual net cash flows $fill in the blank 1 Less amount to be invested $fill in…
Net Present Value A project has estimated annual net cash flows of $7,500 for three years and is estimated to cost $45,000. Assume a minimum acceptable rate of return of 10%. Use the Present Value of an Annuity of $1 at Compound Interest table below. 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 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 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 Determine (a) the net present value of the project and (b) the present value index. If required, use the minus sign to indicate a negative net present value. Net present value of the project (round to the nearest dollar) Present value index (rounded to two decimal places)
Compute the discounted payback statistic for Project C if the appropriate cost of capital is 8 percent and the maximum allowable discounted payback period is three years. (Do not round intermediate calculations and round your final answer to 2 decimal places.) Project C Time: 1 3 4 Cash flow: -$1,900 $840 $750 $790 $480 $280 Discounted payback period years Should the project be accepted or rejected?
A company is considering an iron ore extraction project that requires an initial investment of $1,200,000 and will yield annual cash inflows of $534,283 for three years. The company's discount rate is 9%. Calculate IRR. Present value of ordinary annuity of $1: 10% 12% 14% 15% 16% 18% 20% 1 0.909 0.893 0.877 0.870 0.862 0.847 0.833 1.736 1.690 1.647 1.626 1.605 1.566 1.528 3 2.487 2.402 2.322 2.283 2.246 2.174 2.106 4 3.170 3.037 2.914 2.855 2.798 2.690 2.589 OA. 16% OB. 15% D OC. 14% O OD. 18%
Compute the discounted payback statistic for Project C if the appropriate cost of capital is 6 percent and the maximum allowable discounted payback period is three years. Note: Do not round intermediate calculations and round your final answer to 2 decimal places. Project C 0 1 2 3 Time: Cash flow: -$3,000 $1,280 $ 1,080 $ 1,120 Discounted payback period years Should the project be accepted or rejected? 4 $ 700 5 $ 500
Net Present Value—Unequal Lives Project 1 requires an original investment of $63,800. The project will yield cash flows of $13,000 per year for five years. Project 2 has a calculated net present value of $15,600 over a three-year life. Project 1 could be sold at the end of three years for a price of $56,000. Use the Present Value of $1 at Compound Interest and the Present Value of an Annuity of $1 at Compound Interest tables shown below. Present Value of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 0.890 0.826 0.797 0.756 0.694 3 0.840 0.751 0.712 0.658 0.579 4 0.792 0.683 0.636 0.572 0.482 5 0.747 0.621 0.567 0.497 0.402 6 0.705 0.564 0.507 0.432 0.335 7 0.665 0.513 0.452 0.376 0.279 8 0.627 0.467 0.404 0.327 0.233 9 0.592 0.424 0.361 0.284 0.194 10 0.558 0.386 0.322 0.247 0.162 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…
Yellow Day has a project with the following cash flows: YearCash Flows 0 -$27,500 1 10,800 2 22,300 3 10,020 -3,850 What is the MIRR for this project using the reinvestment approach? The interest rate is 8 percent. O 22.28% O 14.09% O 19.93% O 11.95%
Net Present Value A project has estimated annual net cash flows of $13,750 for three years and is estimated to cost $30,000. Assume a minimum acceptable rate of return of 15%. Use the Present Value of an Annuity of $1 at Compound Interest table below. 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 Determine (a) the net present value of the project and (b) the present value index. If required, use the minus sign to indicate a negative net present value. Net present value of the project (round to the nearest dollar) Present value index (rounded to two decimal places)
Net Present Value A project has estimated annual net cash flows of $6,250 for eight years and is estimated to cost $37,500. Assume a minimum acceptable rate of return of 15%. Use the Present Value of an Annuity of $1 at Compound Interest table below. 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 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 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 Determine (a) the net present value of the project and (b) the present value index. If required, use the minus sign to indicate a negative net present value. Net present value of the project (round to the nearest dollar) Present value index (rounded to two decimal places) Feedback V Check My Work a. Multiply the present value factor for an annuity of…
Annual cash inflows that will arise from two competing investment projects are given below: Investment A $ 3,000 4,000 5,000 6,000 $ 18,000 Year 1 2 3 4 The discount rate is 10% Click here to view Exhibit 148 1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using tables Required: Compute the present value of the cash inflows for each investment Year 1234 S S Investment B $6,000 5,000 4,000 3,000 $18,000 Present Value of Cash Flows Investment A 300 300 $ Investment B

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