Expected Rate of Amount of Investment With This Return (%) Rate of Return or Higher ($B) $ 10 20 12% 10 8 6 4 2 30 40 50 60 The investment schedule in the given table indicates that if the real interest rate is 8 percent, then Multiple Choice we cannot tell what volume of investment will be profitable.. $30 billion will be both saved and invested. $30 billion of investment will be undertaken. $60 billion of investment will be undertaken.

Expected Rate of Amount of Investment With This Return (%) Rate of Return or Higher ($B) $ 10 20 12% 10 8 6 4 2 30 40 50 60 The investment schedule in the given table indicates that if the real interest rate is 8 percent, then Multiple Choice we cannot tell what volume of investment will be profitable.. $30 billion will be both saved and invested. $30 billion of investment will be undertaken. $60 billion of investment will be undertaken.

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 two projects: Cash flows Project A Project B C0�0 −$ 240 −$ 240 C1�1 100 123 C2�2 100 123 C3�3 100 123 C4�4 100 a. If the opportunity cost of capital is 8%, which of these two projects would you accept (A, B, or both)? b. Suppose that you can choose only one of these two projects. Which would you choose? The discount rate is still 8%. c. Which one would you choose if the cost of capital is 16%? d. What is the payback period of each project? e. Is the project with the shortest payback period also the one with the highest NPV? f. What are the internal rates of return on the two projects? g. Does the IRR rule in this case give the same answer as NPV? h. If the opportunity cost of capital is 8%, what is the profitability index for each project? i. Is the project with the highest profitability index also the one with the highest NPV? j. Which measure should you use to choose between the projects?
You are evaluating an investment project, which has a cost of $161,000 today and is expected to provide after-tax annual cash flows of $20,000 for seven years. In order to compute the MIRR, you are modifying the cash flows. Assuming the cost of capital is 9.1 percent, what is the terminal cash flow of the modified cash flows? Question 12 options: $173,074 $176,474 $178,474 $180,974 $182,874 $184,574
Project A, currently requires an investment of IDR 250 billion, and will generate revenue of IDR 275 billion next year. Meanwhile, to build project B, a fund of IDR 2.5 trillion is needed, with a potential revenue of IDR 2.7 trillion in the following year. Using the concepts of internal rate of return and net present value, which project should be built? Explain your reasons. (assuming the prevailing interest rate is 6 percent).
Assume an investment is priced today at $5,000 and has the following income stream: Year Cash Flow 1 123 2 3 4 $ 1,000 - 2,000 3,000 3,000 Would an investor with a required rate of return of 15 percent be wise to invest at a price of $5,000? Multiple Choice No, because the investment has a net present value of - $1,139.15. No, because the investment has a net present value of - $1,954.91. Yes, because the investment has a net present value of $1,069.66. Yes, because the investment has a net present value of $1,954.91. An investor would be indifferent between purchasing and not purchasing the above investment at the stated price.
An investment will provide the following future cash flows. Year 1 6,768 Year 2 = 3,989 Year 3 and 4 = 6,869 Year 5 = 1,797 Using a 9.96% discount rate, what is the present value of this investment?
Trestle Corporation wants to purchase a new finishing machine. They currently have an old machine, which is operable for five more years and is expected to have a zero-disposal value at the end of five years. If the company buys the new machine, the old machine will be sold now for $95,000 (book value is $75,000). The new machine will cost $635,000 and will be depreciated for tax purposes on a straight-line basis over its useful life of 5 years. The new machine will not have a salvage value and will not be sold after its useful life. An additional cash investment in working capital of $25,000 will be required if the new machine is purchased. The investment is expected to net $80,000 in before tax cash inflows during the first year of operation and $235,000 each additional year of use. These cash flows do not include depreciation and are recognized at the end of each year. The working capital investment will not be recovered at the end of the asset's life. The company's tax rate is 32%.
Put answer in table format Yokam Company is considering two alternative projects. Project 1 requires an initial investment of $560,000 and has a present value of cash flows of $2,200,000.0. Project 2 requires an initial investment of $5,000,000 and has a present value of cash flows of $7,000,000. 1. Compute the profitability index for each project.2. Based on the profitability index, which project should the company prefer?

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