You own building V and building S. The next cash flow for each building is expected in 1 year. Building V has a cost of capital of 17.20 percent and is expected to produce annual cash flows of $369,045.00forever. Building S is worth $6,214,435.00 and is expected to produce annual cash flows of $169,044.00 forever. Which assertion is true?O Building V is more valuable than building S and building V is more risky than building SBuilding S is more valuable than building V and building S is more risky than building VO Building V is more valuable than building S and building S is more risky than building VO Building S is more valuable than building V and building V is more risky than building SBuilding V and building S either have the same value, the same level of risk, or both the same value and level of risk.لا

Perpetual cashflows means cash flows which will occur forever or for a indefinite period.

forew You own building V and building S. The next cash flow for each building is expected in 1 year. Building V has forever. Building S is worth $6,214,435.00 and is expected to produce annual cash flows of $169,044.00 O Building Vis more valuable than building S and building V is more risky than building S O Building S is more valuable than building V and building S is more risky than building V Building V is more valuable than building S and building S is more risky than building O Building S is more valuable than building V and building V is more risky than building O Building V and building S either have the same value, the same level of risk, V S or both the same value and level

forew You own building V and building S. The next cash flow for each building is expected in 1 year. Building V has forever. Building S is worth $6,214,435.00 and is expected to produce annual cash flows of $169,044.00 O Building Vis more valuable than building S and building V is more risky than building S O Building S is more valuable than building V and building S is more risky than building V Building V is more valuable than building S and building S is more risky than building O Building S is more valuable than building V and building V is more risky than building O Building V and building S either have the same value, the same level of risk, V S or both the same value and level

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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Similar questions

Company ABC invests in a long-term project that will start generating cash flows 10 years from now (and will then continue generating cash flows forever). The first cash flow is going to be equal to $22 million. Cash flows will then grow 2% per year forever. If the project costs $460 million today, is it a good investment if interest rates are (and are going to be forever) equal to 5%?
Snowflake Resorts is considering investing in a project that has a net investment of $240,000. This project will return positive net cash flows annually for the next 5 years of $80,000 per year. Snowflake Resorts requires a 12% return on all of its investments. The payback period of this investment is ________ years 5 3 4 2 The net present value of this project is $65,355 $48,384 $85,652 $57,635 The profitability index of this project is 2016 5924 7350 3852 When projects have scale differences, only the Net Present Value method will rank the projects correctly True False Fees paid to investment bankers and lawyers for issuing securities are called Component costs Issuance costs Security costs Licensing costs Purposes for considering a capital project may include which of the following Cost reductions Growth projects Government required projects All of the above When the weighted average cost of capital for a project is considered on an after tax…
34. The annual income from the mine is P100,000 and the life of the mine is 25 years. Find the price that an investor is willing to pay if he considers that money is worth 5% and if he is to accumulate a sinking fund at 7% in order to replace the capital he invested?
aa.1
Accounting Sheridan is contemplating a capital investment of $19100. The cash flows over the project's five year life are projected as follows: Expected Annual Cash Inflows Expected Annual Cash Outflows Year 1 $6300 $1100 2 8100 2100 3 10200 2500 4 11700 3100 15600 2600 The asset will be depreciated using the straight-line method with no expected salvage value. The cash payback period is 2.46 years. 2.45 years. 2.36 years. 3.02 years.
5
You are considering an open-pit mining operation. The cash flow pattern is somewhat unusual since you must invest in some mining equipment, conduct operations for two years, and then restore the sites to their original condition. You estimate the net cash flows to be as follows: N Cash flow $1,600,000 1,500,000 1,500,000 -700,000 What is the approximate rate of return of this investment? (a) 25% (b)38% (c) 42% (d)62% 123
Nikul
The Merriweather Printing Company is trying to decide on the merits of constructing a new publishing facility. The project is expected to provide a series of positive cash flows for each of the next four years. The estimated cash flows associated with this project are as follows: Year. Project cash flow 0 ? 1 $810,000 2 $390,000 3 $260,000 4 $460,000 If you know that the project has a regular payback of 2.4 years, what is the projects IRR?
It is estimated that a certain piece of equipment can save as $25,000 per year in labour and materials. The equipment has an expected life of six years and no market value. If the company must earn a 20% annual return on such investments, select the appropriate cash flow diagram that represents this transaction. O A. O B. P= ? A = $25,000 P= ? A= $25,000 1 2 3 4 End of Year 5 6 2 3 4 End of Year Oc. O D. A= $25,000 A = $25,000 ! 3 End of Year 5 6 1 2. 3 6 End of Year P=? P=? Lütfen birini seçin: O A. C О В. В O C. A O D. D
You have the opportunity to invest in a project with the following cash flows. Initial investment/Outlay today: $11,000. Cashflow back to you in 1 year $6000 Cashflow back to you in 2 years $5000 Scrap Value in 2 years $500 Assume interest rates are 5% in the 1 year and 7% in the 2 year. (tip: use the spreadsheet “NPV” from Moodle to helpin your calculations) a. Calculate the NPV of the project (show formula/workings)? b. Should you invest in this project? Why ?
9

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