ITLOS Petroleum is considering the commercial phase of an oil operation in the Tano Basin of Ghana. ITLOS has incurred US$12 million in prospecting cost. the commercial phase requires a capital investment of US$5 million immediately and US$35 million in the first year. Recent assessment reports suggest that the basin has oil deposits in commercial quantities, but actual reverses could vary from current estimates. Possible reserve outcomes and related cash flows follow: scenario reserve 1 2 3 4 5 35 30 25 23 20 year2 year3 year4 year5 year6 NPV 24 25 23 22 31.40 16 17.23 15% 21 25% 18 30% 15 20% 13 10% 8 17 13 11 10 21 15 13 11 (a)compute the NPV of the project under the scenario 5. (b)compute the expected net present value of the project. should the project be implemented? (c) what is the probability that the project will be viable? what is the probability that the project would result in loss 18 11 10 8 8 6 5 1.96 (3.37) not completed

ITLOS Petroleum is considering the commercial phase of an oil operation in the Tano Basin of Ghana. ITLOS has incurred US$12 million in prospecting cost. the commercial phase requires a capital investment of US$5 million immediately and US$35 million in the first year. Recent assessment reports suggest that the basin has oil deposits in commercial quantities, but actual reverses could vary from current estimates. Possible reserve outcomes and related cash flows follow: scenario reserve 1 2 3 4 5 35 30 25 23 20 year2 year3 year4 year5 year6 NPV 24 25 23 22 31.40 16 17.23 15% 21 25% 18 30% 15 20% 13 10% 8 17 13 11 10 21 15 13 11 (a)compute the NPV of the project under the scenario 5. (b)compute the expected net present value of the project. should the project be implemented? (c) what is the probability that the project will be viable? what is the probability that the project would result in loss 18 11 10 8 8 6 5 1.96 (3.37) not completed

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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You plan on working for your CPA firm until December 31, 2020. As of January 1, 2021, you will open your own practice. You are nervous about having sufficient staff to handle the number of clients that are going to leave and go with you. So in early December, you approach three staff members of the existing CPA firm to see if they will go with you. Problems? O a. Yes, this is a breach of duty not to compete O b. Nope, you have not signed a covenant not to compete O c. Yes, this is a conflict of interest O d. Yes, this is a misappropriation Oe. Yes, this is a breach of confidential. information
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We examine what might happen in the worst-case scenario, but the true worst case would involve a total disaster with extremely remote probability. We certainly would like to prepare ourselves for the worst possible outcome, but shall we make decisions based on something that is extremely unlikely to happen? Consider Samsung’s recent experience. Samsung was forced to recall 2.5million Galaxy Note 7 smartphones just one month after it was introduced because multiple reports on the phones caught fire, and eventually stopped all production in the following month. Some estimated that Samsung incurred a $5 billion write-off due to this fiasco. Would you consider it Samsung’s failure not to prepare for this worst-case scenario? Why or why not? As a member of Samsung’s FP&A team, what would you do differently for evaluating future products?
5
AVX Home Entertainment Incorporated recently began a “no-hassles” return policy. A sample of 540 customers who recently returned items showed 330 thought the policy was fair, 180 thought it took too long to complete the transaction, and the rest had no opinion. On the basis of this information, make an inference about customer reaction to the new policy. (Round your answers to 1 decimal place.)
An engineer prepares a report to evaluate a project using PW and IRR. Just before submitting the report, he spills coffee on it, making the first digit of the 2-digit IRR unreadable. The second digit is a 2. The PW is negative and MARR is 15 percent. He doesn’t have time to redo the analysis. Can you help him figure out the IRR?
Online testing The Educational Testing Service is nowadministering several of its standardized tests online—the CLEP and GMAT exams, for example. Since takinga test on a computer is different from taking a test withpencil and paper, one wonders if the scores will bethe same. To investigate this question, researchers createdtwo versions of an SAT-type test and got 20 volunteers toparticipate in an experiment. Each volunteer took bothversions of the test, one with pencil and paper and theother online. Subjects were randomized with respect tothe order in which they sat for the tests (online/paper)and which form they took (Test A, Test B) in whichenvironment. The scores (out of a possible 20) aresummarized in the table.a) Were the two forms (A/B) of the test equivalent interms of difficulty? Test an appropriate hypothesisand state your conclusion.b) Is there evidence that the testing environment (paper/online) matters? Test an appropriate hypothesis andstate your conclusion.
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es Kristen Lu purchased a used automobile for $28,600 at the beginning of last year and incurred the following operating costs: Depreciation ($28,600 + 5 years) Insurance Garage rent Automobile tax and license Variable operating cost Relevain ry The variable operating cost consists of gasoline, oil, tires, maintenance, and repairs. Kristen estimates that, at her current rate of usage, the car will have zero resale value in five years, so the annual straight-line depreciation is $5,720. The car is kept in a garage for a monthly fee. Average fixed cost per mile Variable operating cost per mile Average cost per mile $ 5,720 $ 3,000 $ 1,500 $780 $ 0.11 per mile Required: 1. Kristen drove the car 22,000 miles last year. Compute the average cost per mile of owning and operating the car. (Round your answers to 2 decimal places.)
Compute a final numerical answer for each of the following problems. Youshould work out your solutions on loose leaf paper in an organized manner so that when I post the solutionkey, you can determine why answers that you missed were incorrect. This will allow you to LEARN fromany mistakes so you to not repeat these on the Final Exam (which is worth 35% of your grade in this class).Unless instructed otherwise on a question, round all dollar answers to 2 decimal places, record IRR valuesas a percent rounded to 2 decimal places, round payback period or profitability index values to 1 decimalplace, and record WACC values as a percent rounded to 2 decimal places.USE THE TABLE BELOW TO ANSWER THE FOLLOWING THREE (3) QUESTIONSYear Project A Cash Flows ($s) Project B Cash Flows ($s) Project C Cash Flows ($s)0 -100,000 -700,000 -2,350,0001 25,000 180,000 2,500,0002 20,000 150,000 2,500,0003 30,000 190,000 2,500,0004 25,000 140,0005 25,000 140,0006 20,000The payback period for Project A is…

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