Billabong Tech uses the internal rate of return (IRR) to select projects. Calculate the IRR for each of the following projects and recommend the best project based on this measure. Project T-Shirt requires an initial investment of $24,333 and generates cash inflows of $8,500 per year for 7 years. Project Board Shorts requires an initial investment of $42,333 and produces cash inflows of $14,000 per year for 8 years. The IRR of project T-Shirt is %. (Round to two decimal places.)

Billabong Tech uses the internal rate of return (IRR) to select projects. Calculate the IRR for each of the following projects and recommend the best project based on this measure. Project T-Shirt requires an initial investment of $24,333 and generates cash inflows of $8,500 per year for 7 years. Project Board Shorts requires an initial investment of $42,333 and produces cash inflows of $14,000 per year for 8 years. The IRR of project T-Shirt is %. (Round to two decimal places.)

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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There are two projects under consideration by the Rainbow factory. Each of the projects will require an initial investment or $28,000 and is expected to generate the following cash flows: Q: If the discount rate is 5% compute the NPV of each project and make a recommendation of the project to be chosen.
There are two projects under consideration by the Rainbow factory. Each of the projects will require an initial investment of $34,927 and is expected to generate the following cash flows: First Year Second Year Third Year Total Alpha Project $32,500 $22,500 $4,500 $59,500 Beta Project 7,000 23,500 27,904 58,404 A. Calculate the internal rate of return on both projects. Use the IRR spreadsheet function to calculate internal rate of return. Alpha Project fill in the blank % Beta Project fill in the blank % B. Make a recommendation on which one to accept.
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
big Steve's, makers of swizzle sticks, is considering the purchase of a new plastic stamping machine. This investment requires an initial outlay of $105,000 and will generate net cash inflows of $20,000 per year for 9 years. What is the project's NPV using a discount rate of 7 percent? Should the project be accepted? Why or why not? b. What is the project's NPV using a discount rate of 13 percent? Should the project be accepted? Why or why not? c. What is this project's internal rate of return? Should the project be accepted? Why or why not?
Dowling sportswear is considering building a new factor to produce aluminum baseball bats. This project would require an initial cash outlay of $6,000,000 and would generate annual net cash inflows of $900,000 per year for 7 years. Calculate the project’s NPV using a discount rate of 7 percent. If the discount rate is 7 percent, then the project’s NPV is Round to the nearest dollar
The Mansford Co. Evaluates projects using payback. Suppose that a project requiring an outlay of $816 dollars is followed by the following inflows for the next four years: Year 1 312 Year 2 459 Year 3 78 Year 4 210 What is the payback for this project to two significant places?
Margaritaville Hotel Properties is opening a new beach resort in Tybee Island, GA at a cost of 250 Million in year 0. The hotel is expected to operate for 20 years at the end, be sold for approximately 500 Million in year 20. As an investment the hotel expected to earn $27 Million per year (including $20 Million in year 20). With a discount rate of 8% and reinvestment rate of 8%, analyze the projects feasibility using payback method of budgeting.
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.
Billabong Tech uses the internal rate of return (IRR) to select projects. Calculate the IRR for each of the following projects and recommend the best project based on this measure. Project T-Shirt requires an initial investment of $26,500 and generates cash inflows of $9,000 per year for 7 years. Project Board Shorts requires an initial investment of $38,333 and produces cash inflows of $12,500 per year for 8 years. The IRR of project T-Shirt is %. (Round to two decimal places.)
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%.Plot NPV profiles for the two projects. Identify the projects’ IRRs on the graph.
You are responsible to manage an IS project with a 4-year horizon. The annal cost of the project is estimated at $40,000 per year, and a one-time costs of $120,000. The annual monetary benefit of the project is estimated at $96,000 per year with a discount rate of 6 percent. a. Calculate the overall return on investment (ROI) of the project. b. Perform a break-even analysis (BEA). At what year does break-even occur?
Wandering RV is evaluating a capital budgeting project that is expected to generate $36,950 per year during its six-year life. If its required rate of return is 10 percent, what is the value of the project to Wandering RV?

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