he Drillago Company is involved in searching for locations in which to drill for oil. The firm’s current project requires an initial investment of $15 million and has an estimated life of 10 years. The expected future cash inflows for the project are as shown in the following table. Year Cash Inflows 1 $ 600,000 2 1,000,000 3 1,000,000 4 2,000,000 5 3,000,000 6 3,500,000 7 4,000,000 8 6,000,000 9 8,000,000 10 12,000,000 The firm’s current cost of capital is 13%. Solution Estimated life (years) 10 Cost-of-capital (r) 13% Initial investment $ 15,000,000 Year Cash Flow 0 $ -15,000,000 1 600,000 2 1,000,000 3 1,000,000 4 2,000,000 5 3,000,000 6 3,500,000 7 4,000,000 8 6,000,000 9 8,000,000 10 12,000,000 Year Payback 0 $ -15,000,000 1 2 3 4 5 6 7 8 9 10 By using cell reference calcue the paycheck for years 0:10, respectively
he Drillago Company is involved in searching for locations in which to drill for oil. The firm’s current project requires an initial investment of $15 million and has an estimated life of 10 years. The expected future cash inflows for the project are as shown in the following table. Year Cash Inflows 1 $ 600,000 2 1,000,000 3 1,000,000 4 2,000,000 5 3,000,000 6 3,500,000 7 4,000,000 8 6,000,000 9 8,000,000 10 12,000,000 The firm’s current cost of capital is 13%. Solution Estimated life (years) 10 Cost-of-capital (r) 13% Initial investment $ 15,000,000 Year Cash Flow 0 $ -15,000,000 1 600,000 2 1,000,000 3 1,000,000 4 2,000,000 5 3,000,000 6 3,500,000 7 4,000,000 8 6,000,000 9 8,000,000 10 12,000,000 Year Payback 0 $ -15,000,000 1 2 3 4 5 6 7 8 9 10 By using cell reference calcue the paycheck for years 0:10, respectively
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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|
The Drillago Company is involved in searching for locations in which to drill for oil. The firm’s current project requires an initial investment of $15 million and has an estimated life of 10 years. The expected future |
| Year | Cash Inflows |
| 1 | $ 600,000 |
| 2 | 1,000,000 |
| 3 | 1,000,000 |
| 4 | 2,000,000 |
| 5 | 3,000,000 |
| 6 | 3,500,000 |
| 7 | 4,000,000 |
| 8 | 6,000,000 |
| 9 | 8,000,000 |
| 10 |
12,000,000 |
| The firm’s current cost of capital is 13%. |
| Solution | |||
| Estimated life (years) | 10 | ||
| Cost-of-capital (r) | 13% | ||
| Initial investment | $ 15,000,000 | ||
| Year | Cash Flow | ||
| 0 | $ -15,000,000 | ||
| 1 | 600,000 | ||
| 2 | 1,000,000 | ||
| 3 | 1,000,000 | ||
| 4 | 2,000,000 | ||
| 5 | 3,000,000 | ||
| 6 | 3,500,000 | ||
| 7 | 4,000,000 | ||
| 8 | 6,000,000 | ||
| 9 | 8,000,000 | ||
| 10 | 12,000,000 |
| Year | Payback |
| 0 | $ -15,000,000 |
| 1 | |
| 2 | |
| 3 | |
| 4 | |
| 5 | |
| 6 | |
| 7 | |
| 8 | |
| 9 | |
| 10 |
By using cell reference calcue the paycheck for years 0:10, respectively
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