If by accepting Project A you reduce the after tax cash flows of another Project B of your firm by $100,000 per year for the life of Project A you should when calculating the marginal annual cash flows of Project A. a. ignore the $100,000 but decrease the discount rate b. ignore the $100,000 but increase the discount rate Oc. subtract the $100,000 per year Od. ignore the $100,000 per year e. add on the $100,000 per year

If by accepting Project A you reduce the after tax cash flows of another Project B of your firm by $100,000 per year for the life of Project A you should when calculating the marginal annual cash flows of Project A. a. ignore the $100,000 but decrease the discount rate b. ignore the $100,000 but increase the discount rate Oc. subtract the $100,000 per year Od. ignore the $100,000 per year e. add on the $100,000 per year

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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Your company is currently considering two investment projects. Each project requires an upfront expenditure of $25 million. You estimate that the cost of capital is 10% and the investments will produce the after tax cash flows on the attached image . a)Calculate the payback period for both projects,then compare to identify which project the firm should undertake. b)Evaluate the advantages and disadvantages of using the payback method in investment decisions and assess the situations where it should be used .
Don't Answer the Payback Period since its already been answered
Would you accept a project where you had an initial investment of $10,000,000 but the NPV was only $10,000? Group of answer choices A. There is not enough information B.Yes, because you will make the required return each year and the NPV in additional to the required return. C. No, the NPV is too small for such a large initial investment
NOTE: JUST ANSWER 3. Accounting rate of return4. Profitability index
A firm has two possible investments with the following cash inflows. Each investment costs $435, and the cost of capital is seven percent. Use Appendix B and Appendix D to answer the questions. Assume that the investments are not mutually exclusive and there are no budget restrictions. Cash Inflows Year A B 1 $ 270 $ 170 2 140 170 3 100 170 Based on each investment’s net present value, which investment(s) should the firm make? Use a minus sign to enter negative values, if any. Round your answers to the nearest dollar. Investment A: $ Investment B: $ The firm should make . Based on each investment’s internal rate of return, which investment(s) should the firm make? Round your answers to the nearest whole number. Investment A: % Investment B: % The firm should make . Is this the same answer you obtained in part b? It the same answer as obtained in part b. If the cost of capital were to increase to 9 percent, which investment(s) should the firm…
The table below shows the profit after tax and the book value of investment for three projects A, B, and C Required:Calculate the Accounting Rate of Return (ARR) of the three projects and recommend the best option based on your calculation.
Determine the following: 1. Determine the initial investment required by the press. 2. Determine the annual after tax cash inflows attributable to the press from year 1 to 4 3. Determine the after tax cash flow on year 5. 4. ASSUMING the project’s IRR is 25%, the discount rate should be above 25% for the project to have a PW higher than zero (true or false) 5. Assuming that at the very last minute, you are able to sell the equipment for 200,000 (without altering the book value). What is the cash flow on year 5? PROBLEM: Wells Printing is considering expanding its business by purchasing a printing press. The cost of the press is $2 million. Installation costs amount to $200,000. As a result of acquisition of the press, sales in each of the next 5 years are expected to be $1.6 million from this new line of business, but product costs (excluding depreciation) will represent 50% of sales. The press will not affect the firm’s net working capital requirements. The press will be depreciated…
Har Don't upload any image
NPV and IRR The first two scenarios are independent. All cash flows are after-tax cash flows. The present value tables provided in Exhibit 19B.1 and Exhibit 19B.2 must be used to solve the following problems. Required: 1. Patz Corporation is considering the purchase of a computer-aided manufacturing system. The cash benefits will be $800,000 per year. The system costs $4,000,000 and will last eight years. Compute the NPV assuming a discount rate of 10 percent. Should the company buy the new system? Yes 2. Amy Wetzel has just invested $270,000 in a restaurant specializing in German food. She expects to receive $43,470 per year for the next eight years. Her cost of capital is 5.5 percent. Compute the internal rate of return. Enter your answer as a whole percentage value (for example, 16% should be entered as "16" in the answer box). X % Did Amy make a good decision? Yes 3. For each of the previous two requirements, choose the data analytic type that applies and explain why (descriptive,…

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