Each of the following scenarios is independent. Assume that all cash flows are after-tax cash flows. a. Colby Hepworth has just invested $550,000 in a book and video store. She expects to receive a cash income of $120,000 per year from the investment. b. Kylie Sorensen has just invested $1,700,000 in a new biomedical technology. She expects to receive the following cash flows over the next 5 years: $350,000, $490,000, $850,000, $480,000, and $370,000. c. Carsen Nabors invested in a project that has a payback period of 4 years. The project brings in $960,000 per year. d. Rahn Booth invested $1,500,000 in a project that pays him an even amount per year for 5 years. The payback period is 2.5 years. Required: 1. What is the payback period for Colby? Round your answer to two decimal places. years 2. What is the payback period for Kylie? Round your answer to one decimal place. years 3. How much did Carsen invest in the project?

Each of the following scenarios is independent. Assume that all cash flows are after-tax cash flows. a. Colby Hepworth has just invested $550,000 in a book and video store. She expects to receive a cash income of $120,000 per year from the investment. b. Kylie Sorensen has just invested $1,700,000 in a new biomedical technology. She expects to receive the following cash flows over the next 5 years: $350,000, $490,000, $850,000, $480,000, and $370,000. c. Carsen Nabors invested in a project that has a payback period of 4 years. The project brings in $960,000 per year. d. Rahn Booth invested $1,500,000 in a project that pays him an even amount per year for 5 years. The payback period is 2.5 years. Required: 1. What is the payback period for Colby? Round your answer to two decimal places. years 2. What is the payback period for Kylie? Round your answer to one decimal place. years 3. How much did Carsen invest in the project?

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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2. Jane Summers has just inherited millions from her mother's estate. She is considering investing part of these funds in a small catering business. She would need to purchase a delivery van, equipment, and inventory costing $150,000 to equip the business. Jane's marketing studies indicate that the annual net cash inflow from the business will amount to $36,000. Jane wants to operate the catering business for only 6 years. She estimates that the equipment will have a $10,000 salvage value at the end of that time and that she will just retire and close down the business. Jane's required rate of return is 10%. (Note: relevant present value tables are in the textbook in ch 26 at pg 1121, or use from other sources, as desired.)Required:Compute the net present value of this investment. What would you advise Jane based on your calculations? Show your calculations, including any present value table amounts.
123 Each of the following scenarios is independent. Assume that all cash flows are after-tax cash flows. Campbell Manufacturing is considering the purchase of a new welding system. The cash benefits will be $480,000 per year. The system costs $1,550,000 and will last 10 years. Evee Cardenas is interested in investing in a women's specialty shop. The cost of the investment is $180,000. She estimates that the return from owning her own shop will be $55,000 per year. She estimates that the shop will have a useful life of 6 years. Barker Company calculated the NPV of a project and found it to be $63,900. The project's life was estimated to be 8 years. The required rate of return used for the NPV calculation was 10%. The project was expected to produce annual after-tax cash flows of $135,000. Required: 1. Compute the NPV for Campbell Manufacturing, assuming a discount rate of 12%. If required, round all present value calculations to the nearest dollar. Use the minus sign to indicate a…
Brian owns a tanning salon that is expected to produce annual cash flows forever. The tanning salon is worth $636,600.00 and the cost of capital is 6.40%. Annual cash flows are expected with the first one due in one year and all subsequent ones growing annually by 2.30%. What is amount of the annual cash flow produced by the tanning salon in 1 year expected to be? O $55,384.20 (plus or minus $10) O $26,100.60 (plus or minus $10) O $155,268.29 (plus or minus $10) O $15,526,829.27 (plus or minus $10)
A8) Gerry is considering buying a small business that makes t-shirts. He plans on running the business for 17 years before selling it. He expects to make $25,506 each semiannual period for the 17 years that he owns the business with his first $25,506 realized at the end of the first semiannual period. He has also contracted with 3 large events to make t-shirts that will generate cash flows of $17,639, $22,850, and $11,555 in 3 years, 9 years and 13 years respectively. At the end of year 17 he plans to sell the business of $186,090 after collecting the $25,506 in annual revenue. How much should he pay for the business if the interest rate is currently 13.63%
Bruce is considering the purchase of a restaurant named Hard Rock Hollywood. The restaurant is listed for sale at $1,030,000. With the help of his accountant, Bruce projects the net cash flows (cash inflows less cash outflows) from the restaurant to be the following amounts over the next 10 years: Years Amount 1-6 $ 83,000 (each year) 7 93,000 8 103,000 9 113,000 10 123,000 Bruce expects to sell the restaurant after 10 years for an estimated $1,130,000. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use appropriate factor(s) from the tables provided. Round your answer to 2 decimal places.)Required:1-a. Calculate the total present value of the net cash flows if Bruce wants to make at least 10% annually on his investment. (Assume all cash flows occur at the end of each year.) 1-b. Should he purchase the restaurant?

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