DR. P is considering a new project based on the information below. However, the firm has an option to abandon the project after the 2nd year. What is the Expected NPV of the project if they abandon Scenario 3at the end of year 2? WACC for the project 0.100 data in thousands 0 1 2 3 Initial costs 2,782 Prob Scenario 1 25% 2,565 2,565 2,565 Scenario 2 60% 1,844 1,844 1,844 Scenario 3 15% -695 -695 -695

DR. P is considering a new project based on the information below. However, the firm has an option to abandon the project after the 2nd year. What is the Expected NPV of the project if they abandon Scenario 3at the end of year 2? WACC for the project 0.100 data in thousands 0 1 2 3 Initial costs 2,782 Prob Scenario 1 25% 2,565 2,565 2,565 Scenario 2 60% 1,844 1,844 1,844 Scenario 3 15% -695 -695 -695

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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Find the Annual Equivalent Worth AEW for the indefinite project described by (jo» ND-), G, Nc-l»? Assume a MARR of 12% for the project. For the defender, the AEC are described below on the left side. For the challenger, the AEC are described on the right side. 5400 N=1 5100 5350 N=2 4900 5200 N=3 4800 5300 N=4 5300 5500 N=5 5900
You must decide firm which of the proposed projects should be accepted for the upcoming year since only $6 million is available. Which projects should be accepted? Project Cost (millions) NPV(millions) A 3.25 0.80 В 1.75 0.52 C 4.5 0.69 D 3.75 0.95 E 1.25 0.25 F 0.50 0.25
Problem 4. Which project would you select on the basis of rate of return, assuming MARR =15%. Please use excel spreadsheet to answer.
Please see attached
The Ulrich Corporation is trying to choose between the following two mutually exclusive design projects. If the required rate of return is 10%, which of the following statements is correct? (a) Select A2 because it has a higher PI.(b) Select A2 because it has a higher RO R. (c) Select Al because its incremental PI exceeds 1.(d) Not enough information to decide.
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Generro Company is considering the purchase of equipment that would cost$60,000and offer annual cash inflows of$16,300over its useful life of 5 years. Assuming a desired rate of return of10%, is the project acceptable? (PV of \$1 and PVA of \$1) (Use appropriate factor(s) from the tables provided.) Mitiple Choice The answer cannot be detergined. No, since the negative net present value indicates the investmeot will yield a fate of retum below the desred tate of return. Yes, since the investment will generate$81.500in future cosh flows, which is gremer than the purchase cont of$60,000Yes, since the positve net present valse ind cates the investment will eam a rate of return greater than10 h.
None
A proposal to reduce oil spill on MX5 has a B-C ratio of 1.5. The conventional annual worth of benefits is P560,000 and the disbenefits is P100,000. What is the first cost of the project if the interest rate is 6% per year and the project is expected to have a 20-year life? ANSWER: Blank 1 Blank 1 Add your answer
You are considering the following project. What is the NPV of the project? WACC of the project: 0.10 Revenue growth rate: 0.05 Tax rate: 0.40 Revenue for year 1: 13,000 Fixed costs for year 1: 3,000 variable costs (% of revenue): 0.30 project life: 3 years Economic life of equipment: 3 years Cost of equipment: 20,000 Salvage value of equipment: 4,000 Initial investment in net working capital: 2,000
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