3. Consider a project with the following cash-flows:Timet=0t=1t=2t=3Cash-flow-1023What is the project's internal rate of return?A. 0.00%В. 7.58%C. 12.21%D. 14.21%E. None of the above4. A share is currently trading at £555.56 and is expected to pay out a dividend of£100 in exactly a year's time. Its dividends are expected to grow at a constant ratethereafter. What is the value of the annual growth rate if you know that the marketcapitalization rate is 15% per annum?A. -3% per annumB. 0% per annumC. 3% per annumD. 4% per annumE. 5% per annum5. What is the beta of a portfolio that has invested 10% in the riskless asset and theremainder in the following shares (assuming the answer is rounded to the nearest2nd decimal)?Share % Invested BetaX40%2Y30%1.520%1.2A. 1.59В. 1.49С. 1.18D. 0.75E. None of the above 1. Consider the following five types of risk:(1) The risk of an oil explorer hitting oil(2) The risk of an oil company's revenues falling because the oil price falls as aresult of weak demand(3) The risk of a pharma company failing to successfully develop a drug that is atits development stage(4) The risk of Google's revenues declining because of competition fromFacebook(5) The risk of Google's revenues declining because of a downturn in the globaladvertising industryWhich of the following statements is correct?A. Risks 1, 2 and 3 are diversifiable, the other risks are not diversifiable.B. Risks 1, 3 and 4 are diversifiable, the other risks are not diversifiable.C. Risks 1, 3 and 5 are diversifiable, the other risks are not diversifiable.D. Risks 2, 3 and 4 are diversifiable, the other risks are not diversifiable.E. None of the above2. According to the CAPM, which has a higher expected rate of return: an individualstock with a beta of one or a diversified portfolio with a beta of one?A. The diversified portfolio.B. The individual stock.C. They have the same expected rate of return.D. Cannot tell, it depends on the market risk premium.E. Cannot telI, it depends on the market risk premium and the risk-free rate.

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Answered: Consider a project with the following…

Consider a project with the following cash-flows: ime Cash-flow t=1 t=2 t=3 3 t=0 -10 2 What is the project's internal rate of return? A. 0.00% B. 7.58% C. 12.21% D. 14.21% E. None of the above

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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QUESTION #1: Which of the following is a disadvantage of using the IRR method of capital budgeting over other types: A- IRR does not consider the time and value of money. B- IRR assumes reinvestment of project cash flows at the same rate as the IRR C- IRR ignores the prudent simplicity of paybacks D- None of the above QUESTION #2: The net present value (NPV) of an investment is___________. A- The present value of all benefits (cash inflows) B- The present value of all costs (cash outflows) of the project C- The present value of all benefits (cash inflows) minus the present value of all costs (cash outflows) of the project D- The present value of all benefits (cash outflows) minus the present value of all costs (cash inflows) of the project
When the underlying riskiness of free cash flows (FCF) decreases, the value of the project O increases stays the same decreases
be appropriate? Explain. 8.4 Average Accounting Return Concerning AAR: LO 2 Describe how the average accounting return is usually calculated and describe the information this measure provides about a sequence of cash flows. What is the AAR criterion decision rule? a. b. What are the problems associated with using the AAR as a means of evaluating a project's cash flows? What underlying feature of AAR is most troubling to you from a financial perspective? Does the AAR have any redeeming qualities?
Which of the following statements is true regarding the payback period? Multiple Choice It measures the length of time that it takes for a project to recover its initial cost from the discounted net cash inflows that it genera It measures the length of time that it takes for a project to recover its initial cost from the net cash inflows that it generates. It measures the length of time that it takes for a project to recover its initial cost from the incremental net operating income that It measures the length of time that it takes for a project to recover its initial cost from the discounted incremental net operating it generates.
A6)
When evaluating a project with non-normal cash flows (cash flows change sign for at least two times during the project life), the best method to use for capital budgeting analysis is the: internal rate of return payback rule discounted payback Modified internal rate of return (MIRR)
I need help solving letter c (I have already solved the previous problems a and b shown below): please help ASAP Kenny and Jannah qualify for a 6-year car loan with a 10.1% APR and a 3-year car loan with an 8.5% APR. They found a new 2019 Ford F250 Superduty listed at $39,900. Their combined monthly income is $6100 during ski season, but they know that will drop in the summer. They know they shouldn't pay more than 10% of their income on car payments. a) Assuming Kenny and Jannah make the down payment from part (a) and will make payments for the entire life of the loan, how much will they pay monthly for each loan option? Are either of these options within 10% of their monthly income? Indicate which formula you use and identify all of the relevant variables (A, P, APR, n, Y, and/or PMT). Loan Option 1 (6 years): Loan Option 2 (3 years): A= $671.889487 11.01% A= $976.9197489 18.71% Neither of these options are within…
4. Modified internal rate of return (MIRR) The IRR evaluation method assumes that cash flows from the project are reinvested at the same rate equal to the IRR However, in reality the reinvested cash flows may not necessarily generate a return equal to the IRR. Thus, the modified IRR approach makes a more reasonable assumption other than the project's IRR Consider the following situation: Cold Goose Metal Works Inc. is analyzing a project that requires an initial investment of $600,000. The project's expected cash flows are: Year Year 1 Year 2 Year 3 Year 4 Cold Goose Metal Works Inc.'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): 17.50% 14.00% Cash Flow $350,000 -100,000 450,000 400,000 19.25%
What is the 'golden rule' for finding the Internal Rate of Return (IRR) of an investment project cash flow? a)Vary the discount rate until the net present value of the cash flow equals zero. b)Vary the discount rate until the net present value of the cash flow is positive c)Vary the discount rate to the point of maximum increase in the net present value d)Vary the discount rate until the net present value of the cash is negative
Assume a project has normal cash flows. All else equal, which of the following statements is correct? A project's regular payback increases as the WACC declines. OA project's IRR increases as the WACC declines. A project's NPV declines as the WACC declines. 4 A project's discounted payback increases as the WACC declines. O A project's MIRR is unaffected by changes in the WACC. None of the above statement.
16)For the following stream of free cash flows, calculate the internal rate of return. Year 0 1 2 3 4 5 Free Cash Flows -45,452 10,005 14,921 12,537 10,452 21,455 Group of answer choices 14.5% 12.7% 13.9% 11.5%

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