Consider the following three investment opportunities: Project I would require an immediate cash outlay of $50,000 and would result in cash savings of $18,000 each year for 4 years Project II would require cash outlays of $8,000 per year and would provide a cash inflow of $35,000 at the end of 4 years. Project III would require a cash outlay of $34,000 now and would provide a cash inflow of $55,000 at the end of 4 years. PV factor for $1 annuity over 4 years at 12% is 3.037 and PV factor of $1 for 4 year at 12% is 0.636. The discount rate is 12%. 1. What is the NPV from Project-I. Show your work 2. What is the NPV from project-II. Show your work. 3. What is the NPV from Project-III. Show your work. 4. Which of the three project should be accepeted and which one(s) should not be accepeted? Why?

Consider the following three investment opportunities: Project I would require an immediate cash outlay of $50,000 and would result in cash savings of $18,000 each year for 4 years Project II would require cash outlays of $8,000 per year and would provide a cash inflow of $35,000 at the end of 4 years. Project III would require a cash outlay of $34,000 now and would provide a cash inflow of $55,000 at the end of 4 years. PV factor for $1 annuity over 4 years at 12% is 3.037 and PV factor of $1 for 4 year at 12% is 0.636. The discount rate is 12%. 1. What is the NPV from Project-I. Show your work 2. What is the NPV from project-II. Show your work. 3. What is the NPV from Project-III. Show your work. 4. Which of the three project should be accepeted and which one(s) should not be accepeted? Why?

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 projected to cost $2,000,000 to undertake. It will generate positive cash inflows as follows: Year 1 - $400,000; Year 2 500,000; Year 3 - $650,000; ear 4 - 750,000; Year 5 - 800,000. What is the project's Profitability Index if the required return is 10% ?
Use the NPV method to determine whether Kyler Products should invest in the following projects: Project A: Costs $280,000 and offers seven annual net cash inflows of $52,000. Kyler Products requires an annual return of 12% on investments of this nature. Project B: Costs $385,000 and offers 9 annual net cash inflows of $75,000. Kyler Products demands an annual return of 10% on investments of this nature. (Click the icon to view Present Value of $1 table.) (Click the icon to view Present Value of Ordinary Annuity of $1 table.) Read the requirements. Requirement 1. What is the NPV of each project? Assume neither project has a residual value. Round to two decimal places. (Enter any factor amounts to three decimal places, X.XXX. Use parentheses or a minus sign for a negative net present value.) Caclulate the NPV (net present value) of each project. Begin by calculating the NPV of Project A. Project A: Years 1-7 0 Present value of annuity Investment Net present value of Project A Calculate…
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
An investment project provides cash inflows of $ 608 per year for 5 years. What is the NPV of the project if the initial cost is $ 1,028 , assuming a 11.1 percent required rate of return?
. calculate the net present value of the following: Project A requires an initial investment of $1,000 and is expected to generate cash flows of $400 per year for 3 years
Consider two investment projects, both of which require an upfront investment of $10 million and pay a constant positive amount each year for the next 12 years. Under what conditions can you rank these projects by comparing their IRRS? (Select the best choice below.) A. Ranking by IRR will work in this case so long as the projects' cash flows do not decrease from year to year. B. Ranking by IRR will work in this case so long as the projects' cash flows do not increase from year to year. C. Ranking by IRR will work in this case so long as the projects have the same risk. D. There are no conditions under which you can use the IRR to rank projects.
Use the NPV method to determine whether Stenback Products should invest in the following projects: Project A: Costs $260,000 and offers eight annual net cash inflows of $54,000. Stenback Products requires an annual return of 14% on investments of this nature. Project B: Costs $395,000 and offers 10 annual net cash inflows of $77,000. Stenback Products demands an annual return of 12% on investments of this nature. (Click the icon to view Present Value of $1 table.) (Click the icon to view Present Value of Ordinary Annuity of $1 table.) Read the requirements. Requirement 1. What is the NPV of each project? Assume neither project has a residual value. Round to two decimal places. (Enter any factor amounts to three decimal places, X.XXX. Use parentheses or a minus sign for a negative net present value.) Caclulate the NPV (net present value) of each project. Begin by calculating the NPV of Project A Net Cash Inflow Project A: Years 1-8 0 Present value of annuity Investment Net present value…
A project requires an initial investment of $60 million and will then generate the same cash flow every year for 7 years. The project has an internal rate of return of 16% and a cost of capital of 10%. 1. What is the project's NPV (in $ million)?
A two-year project has an initial investment of $38,643,310 and involves both a cash inflow and outflow. The cash inflow of $62,423,810 occurs at the end of year 1, while the cash outflow of $11,890,200 occurs at the end of year 2. The required rate of return is 13.5%. What is the NPV of the project? Options $7,122,513 $7,300,576 $7,478,639 $7,656,702 $7,834,764
A project that provides annual cash flows of $22,500 for 7 years costs $84,000 today. a. If the required return is 12 percent, what is the NPV for this project? b. Determine the IRR for this project.

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