Skysong, Inc. is using a discounted cash flow model.Scenario 1: Cash flows are fairly certain$180/year for 5 yearsRisk-adjusted discount rate is 6%Risk-free discount rate is 4%Identify which model Skysong might use to estimate the discounted fair value under each scenario, and calculate the fair value. (Forcalculation purposes, use 5 decimal places as displayed in the factor table provided. Round final answers to 2 decimal places, e.g. 5,275.25.)Click here to view the factor table PRESENT VALUE OF 1Click here to view the factor table PRESENT VALUE OF AN ANNUITY OF 1.Scenario 1.Skysong might useFair ValueScenario 2:Skysong might useFair Value$Scenario 2: Cash flows are uncertain75% probability that cash flows will be $180 in 5 years25% probability that cash flows will be $95 in 5 yearsRisk-adjusted discount rate is 6%Risk-free discount rate is 4%$traditional approach ✓ model.expected cash flowmodel.

The discounted cash flow model calculates an investment's intrinsic value using the projection of…

Answered: dentify which model Skysong might use…

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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Consider the following cash flows: Year Cash Flow 0 -$ 28,900 1 14,800 2 3 14,100 10,500 a. What is the profitability index for the cash flows if the relevant discount rate is 8 percent? Note: Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161 b. What is the profitability index if the discount rate is 13 percent? Note: Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161 c. What is the profitability index if the discount rate is 20 percent? Note: Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161 Answer is not complete. 0.181 × a. Profitability index b. Profitability index c. Profitability index
Consider the following cash flows: Year Cash Flow 0 -$ 29,500 1 14,200 2 3 14,700 11,100 a. What is the profitability index for the cash flows if the relevant discount rate is 10 percent? Note: Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161. b. What is the profitability index if the discount rate is 15 percent? Note: Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161. c. What is the profitability index if the discount rate is 22 percent? Note: Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161. a. Profitability index b. Profitability index c. Profitability index
Consider the following cash flows: Year Cash Flow 0 -$ 14,800 1 8,400 2 7,600 4,300 a. What is the profitability index for the above set of cash flows if the relevant discount rate is 10 percent? Note: Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161. b. What is the profitability index if the discount rate is 15 percent? Note: Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161. c. What is the profitability index if the discount rate is 22 percent? Note: Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161. a. Profitability index b. Profitability index c. Profitability index
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Consider the following cash flows: Year Cash Flow 0 −$28,300 1 15,400 2 13,500 3 9,900 a. What is the profitability index for the cash flows if the relevant discount rate is 9 percent? (Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161.) b. What is the profitability index if the discount rate is 14 percent? (Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161.) c. What is the profitability index if the discount rate is 25 percent? (Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161.)
Consider the following cash flows: Year Cash Flow -$28,600 15,100 13,800 10,200 1 2 a. What is the profitability index for the cash flows if the relevant discount rate is 11 percent? (Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161.) b. What is the profitability index if the discount rate is 16 percent? (Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161.) c. What is the profitability index if the discount rate is 23 percent? (Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161.) Profitability index а. b. Profitability index Profitability index C.
Single Cash Flow Present Value Inputs Single Cash Flow $1,000 Discount Rate/Period 6% Number of Periods 5 Present Value using a Time Line Period 1 2 3 4 Cash Flows Present Value of Each Cash Flow Present Value Present Value using the Formula Present Value Present Value using the PV Function Present Value
Consider the following cash flows: Year Cash Flow 0 −$ 29,000 1 14,700 2 14,200 3 10,600 What is the profitability index for the cash flows if the relevant discount rate is 10 percent? Note: Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161. What is the profitability index if the discount rate is 15 percent? Note: Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161. What is the profitability index if the discount rate is 22 percent? Note: Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161.
Assume the appropriate discount rate for the following cash flows is 10.2 percent. Year Cash Flow 1 $2,100 2 2,000 3 1,700 4 1,500 What is the present value of the cash flows? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Suppose you need $5,000 in one year, $4,300 more in two years, and $5,000 more in three years. Match each present value amount to the corresponding cash flow, assuming a discount rate of 17%. (Round all answers to two decimal places.) Instructions Drag and drop application. Present value of the Year 1 cash flow Present value of the Year 1 cash flow drop zone empty. Present value of the Year 2 cash flow Present value of the Year 2 cash flow drop zone empty. Present value of the Year 3 cash flow Present value of the Year 3 cash flow drop zone empty. $3,141.21 $3,121.85 $4,273.50
Assume the appropriate discount rate for the following cash flows is 10.3 percent. Year Cash Flow 1 $2,150 2,050 234 1,750 1,550 What is the present value of the cash flows? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Present value

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dentify which model Skysong might use to estimate the discounted fair value under each scenario, and calculate the fair value. (For calculation purposes, use 5 decimal places as displayed in the factor table provided. Round final answers to 2 decimal places 5275251