Question # 2Global Systėms Inc. Plans to open a new product line next year. Theafter tax cash inflows of the two plans is listed below. .The firm’scost of capital is 15 percent. The initial investment for each plan isRs5,00,000.PLANYEAR 1 YEAR2YEAR3YEAR4YEARSABRs300Rs225.Rs325Rs325Rs150Rs100XYRs150Rs200-"Rs300Rs100a) Construct the NPV profiles for PLAN AB and PLAN XY. WhichPLAN has a higher IRR?.b) According to the NPV criterion which PL AN should GlobalSystems choose?c) Calculate the cost of capital at which the NPV and the IRRrankings conflict?.d) Which plan should the company choose? Why?*Note: All value of year 1 to 5 are in "000"

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Global Systėms Inc. Plans to open a new product line next year. The after tax cash inflows of the two plans is listed below. The firm's cost of capital is 15 percent. The initial investment for each plan is Rs5,00,00o. PLAN YEAR 1 YEAR2 YEAR3_YEAR4 YÉARS AB Rs300 Rs325 Rs150 "Rs30O Rs225 - Rs100 XY Rs150 Rs200 Rs325 Rs100 a) Construct the NPV profiles for PLAN AB and PLAN XY. Which PLAN has a higher IRR?. b) According to the NPV criterion which PLAN should Global Systems choose? c) Calculate the cost of capitał at which the NPV and the IRR rankings conflict?. d) Which plan should the company choose? Why?

Global Systėms Inc. Plans to open a new product line next year. The after tax cash inflows of the two plans is listed below. The firm's cost of capital is 15 percent. The initial investment for each plan is Rs5,00,00o. PLAN YEAR 1 YEAR2 YEAR3_YEAR4 YÉARS AB Rs300 Rs325 Rs150 "Rs30O Rs225 - Rs100 XY Rs150 Rs200 Rs325 Rs100 a) Construct the NPV profiles for PLAN AB and PLAN XY. Which PLAN has a higher IRR?. b) According to the NPV criterion which PLAN should Global Systems choose? c) Calculate the cost of capitał at which the NPV and the IRR rankings conflict?. d) Which plan should the company choose? Why?

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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Project X has an upfront $3.5 million capital expe which is converted into an equivalent seven year annuity at a discount rate of 8% per year. Project Z has a $7 million initial capital outlay and will last for 14 years. Project Z has the same discount rate as Project X. What is the annualized capital cost of Project X? O $766,912 O $742,753 O $528,050 O $672,253
Your company is considering purchasing an expensive plece of equipment. The manufacturer of the equipment offers a payment plan to pay $100,000 annually for 4 years. Assuming no other cash flow, the first payment is due at the end of the first year, and an interest rate of 6%, the minimum Present amount of money you will need is most nearly O $370,000 O $380.000 O 390.000 O 5400,000 O 5410.000 O S420.000
One year ago, JK Mfg. deposited $20,839 in an investment account for the purpose of buying new equipment four years from today. Today, it is adding another $22872 to this account. The company plans on making a final deposit of $20,217 to the account one year from today. How much will be available when it is ready to buy the equipment, assuming the company earns 10.91% APR on its invest funds?
6. A company wishes to borrow $7500 000 for 8 years. One source will lend the money at j2 = 9% if it is amortized by semi-annual payments. A second source will lend the money at j2 returned in a lump sum at the end of 5 years. If the second source is used, in order to pay back thel principal, a sinking fund will be established by semi-annual deposits that accumulate at j2 = 3.9%. = 7.6% if only the interest is paid semi-annually and the principal is (a) What is the semi-annual cost under the amortization plan? (b) What is the semi-annual cost under the sinking fund plan? (c) Which plan should the company choose, and how much can they save semi- annually by using the better plan?
Bank Muzn provides musharakah mutanaqisah financing to Moonway Corporation for house developing project amounting to OR 250,000. This amount represents 25% of the total cost of the project. The term of financing is for 10 years and the partner is required to pay back the bank in 10 equal installments yearly. Calculate Muzn’s share of capital at year 5
company is considering three independent projects for October 2021. The three projects are project X, project Y and project Z. Given the following cash flow information, calculate the payback period for each. If the company requires a 3-year payback before an investment can be made, which project(s) would be accepted? Year Project X ($) Project Y ($) Project Z ($) O (Investment) -2,000 -$10,000 -$5,000 1. -2,000 -6,000 -2,000 800 4,000 5,000 3 600 3,000 5,000 4 600 2,000 5,000 400 2,000 2,000
Project A costs $5,300 and will generate annual after-tax net cash inflows of $1,900 for five years. What is the NPV using 5% as the discount rate? Round your present value factor to three decimal places and final answer to the nearest dollar. (Click here to see present value and future value tables) 2,928 x
Two years ago, Lou Marshall, Inc. deposited $18,125 in an investment account for the purpose of buying new equipment four years from today. Last year, it added another $20,212 to this account. The company plans on making a final deposit of $17,503 to the account today. How much will be available when it is ready to buy the equipment, assuming the company earns 13.27% APR on its invested funds? Choose the closest amount. $118,681.22 $92,502.23 $91,918.47 $104,777.28 $72,097.87
Keystone Healthcare Corp. is proposing to spend $101,700 on a 10-year project that has estimated net cash flows of $18,000 for each of the 10 years. Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 1.833 1.736 1.690 1.626 1.528 3 2.673 2.487 2.402 2.283 2.106 4 3.465 3.170 3.037 2.855 2.589 5 4.212 3.791 3.605 3.352 2.991 6 4.917 4.355 4.111 3.784 3.326 7 5.582 4.868 4.564 4.160 3.605 8 6.210 5.335 4.968 4.487 3.837 9 6.802 5.759 5.328 4.772 4.031 10 7.360 6.145 5.650 5.019 4.192 a. Compute the net present value, using a rate of return of 15%. Use the table of present value of an annuity of $1 presented above. If required, round to the nearest dollar. Use the minus sign to indicate a negative net present value. Present value of annual net cash flows $ Less amount to be invested $ Net present value $ b. Based on the analysis prepared in part (a), is the rate of return (1) more than…
113.
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A company has had record profits and decided to use some of the profits to pay for manufacturing improvements. If the company can invest $1,600,000.00 in an a annuity will that will make payments at the beginning of every six months for 4 years. If the annuity pays 5.6%, compounded semi-annual. What is the size of payments that the company can expect?The payment amount will be $. (Round to 2 decimal places.)

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