Investment Option "South" This potential investment is less risky and shorter term, so it has a minimum rate of return of 8.00%. This investment would require an initial outlay of cash of $169,000, and at the end of the 4-year life of this investment GEC Corporation is expected to have to pay a wind- down cost of $16,900. For the first 3 years of this investment, net annual cash inflows are expected to be $41,000 and for the last year of the investment, the net annual cash inflow is expected to be $102,500. 6. How much is the present value of the purchase of equipment? 7. How much is the present value of the wind-down cost? 8. How much is the present value of the annual cash inflows for the first 3 years? 9. How much is the present value of the annual cash inflow for the final year of this investment? 10. How much is the Net Present Value? 11. What is the Internal Rate of Return? (round to the nearest hundredths place/input code: $ $ %

Investment Option "South" This potential investment is less risky and shorter term, so it has a minimum rate of return of 8.00%. This investment would require an initial outlay of cash of $169,000, and at the end of the 4-year life of this investment GEC Corporation is expected to have to pay a wind- down cost of $16,900. For the first 3 years of this investment, net annual cash inflows are expected to be $41,000 and for the last year of the investment, the net annual cash inflow is expected to be $102,500. 6. How much is the present value of the purchase of equipment? 7. How much is the present value of the wind-down cost? 8. How much is the present value of the annual cash inflows for the first 3 years? 9. How much is the present value of the annual cash inflow for the final year of this investment? 10. How much is the Net Present Value? 11. What is the Internal Rate of Return? (round to the nearest hundredths place/input code: $ $ %

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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NPV Calculate the net present value (NPV) for a 15-year project with an initial investment of $30,000 and a cash inflow of $8,000 per year. Assume that the firm has an opportunity cost of 17%. Comment on the acceptability of the project. The project's net present value is $ (Round to the nearest cent.)
F1
(Net present value calculation) Big Steve's, makers of swizzle sticks, is considering the purchase of a new plastic stamping machine. This investment requires an initial outlay of $95,000 and will generate net cash inflows of $19,000 per year for 11 years. a. What is the project's NPV using a discount rate of 11 percent? Should the project be accepted? Why or why not? b. What is the project's NPV using a discount rate of 13 percent? Should the project be accepted? Why or why not? c. What is this project's internal rate of return? Should the project be accepted? Why or why not? a. If the discount rate is 11 percent, then the project's NPV is $ (Round to the nearest dollar.).
Heedy Inc. is considering a capital investment proposal that costs $460,000 and has an estimated life of four years, and no residual value. The estimated net cash flows are as follows: Net Cash Flow $195,000 160,000 120,000 80,000 Year 1 2 3 4 The minimum desired rate of return for net present value analysis is 10%. The present value of $1 at compound interest rates of 10% for 1, 2, 3, and 4 years is 0.909, 0.826, 0.751, and 0.683, respectively. Determine the net present value. Enter negative values as negative numbers. 5,825 X
PRESENT AND FUTURE VALUES OF A CASH FLOW STREAM An investment will pay $150 at the end of each of the next 3 years, $250 at the end of Year 4, $350 at the end of Year 5, and $550 at the end of Year 6. a. If other investments of equal risk earn 10% annually, what is its present value? Round your answer to the nearest cent. $ b. If other investments of equal risk earn 10% annually, what is its future value? Round your answer to the nearest cent. $
Initial investment of 900 million with operating costs of 40 million/year. The profit in the first year is 130 million, the following year it increases with a gradient of 30 million/year until the 5th year, then remains until the 8th year, and then decreases with a gradient of 20 million/year. If the investment age is 12 years and the residual value is 300 million, evaluate the investment using the PBP and DPBP methods if the prevailing interest rate is 10%/year.
Fargo Inc. is considering a project that will require an initial investment of $1.5 million. The project will provide incremental cash inflows of $600,000 for the next five years. If the required return on the project is 15%, what is its discounted payback? If the company’s investment cutoff threshold is three years, should the project be given the go-ahead? Select one: a. 3 years and 4.55 months; yes b. 3 years and 4.55 months; no c. 4 years and 11.55 months; yes d. 4 years and 11.55 months; no e. 5 years and 1 month; no
← (Net present value calculation) Big Steve's, makers of swizzle sticks, is considering the purchase of a new plastic stamping machine This investment requires an initial outlay of $105,000 and will generate net cash inflows of $17,000 per year for 9 years a. What is the project's NPV using a discount rate of 11 percent? Should the project be accepted? Why or why not? b. What is the project's NPV using a discount rate of 16 percent? Should the project be accepted? Why or why not? c. What is this project's internal rate of return? Should the project be accepted? Why or why not?
Subject:- finance
Consider the 6 divisible investment alternatives shown below. The planning horizon is 8 years. The MARR is 15%. $60,000 is available for investment. Solve, a. What proportion of each investment is to be included in the optimum investment portfolio? b. Solve part a when full or partial investment cannot be made in more than 3 of the investments. c. Solve part a when investments P and R are mutually exclusive.
A new investment offers TimeTek future cash flows of $Q in six years and SP in 12 years. Assuming a negative interest rate of throughout the entire time, TimeTek will pay up to $50,000 today to receive these future cash flows. If the interest rate becomes zero (r=0%), what will TimeTek be willing to pay for these same cash flows $Q and SP? O Less than $50,000 O $50,000 O Not enough information to determine More than 50,000
Investment Timing Option: Decision-Tree Analysis Kim Hotels is interested in developing a new hotel in Seoul. The company estimates that the hotel would require an initial investment of $18 million. Kim expects the hotel will produce positive cash flows of $3 million a year at the end of each of the next 20 years. The project's cost of capital is 13%. a. What is the project's net present value? Do not round intermediate calculations. Enter your answer in millions. For example, an answer of $1.23 million should be entered as 1.23, not 1,230,000. Round your answer to two decimal places, $ million b. Kim expects the cash flows to be $3 million a year, but it recognizes that the cash flows could actually be much higher or lower, depending on whether the Korean government imposes a large hotel tax. One year from now, Kim will know whether the tax will be imposed. There is a 50% chance that the tax will be imposed, in which case the yearly cash flows will be only $2.2 million. At the same…

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