Justin Lieberman must earn a minimum rate of return of 16.79% as compensation for the risk of the followinginvestmenta. Use present value techniques to estimate the IRR on this investment.b. On the basis of your finding in part a, should Justin make the proposed investment?a. The yield on this investment is %. (Round to two decimal places.)Data tableInitial InvestmentEnd of Year12345$15,119Income$3,957$4,879$5,900$3,601$2,000- XC

The internalrate of return is a discount rate that equates the NPV of an investment opportunity to…

Answered: Justin Lieberman must earn a minin um…

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 have an opportunity to invest $104,000 now in return for $79,800 in one year and $29,600 in two years. If your cost of capital is 9.2%, what is the NPV of this investment? Question content area bottom Part 1 The NPV will be $XX enter your response here . (Round to the nearest cent.)
Decision D6, which has three possible choices (X, Y, or Z), must be made in year 3 of a 6-year study period in order to maximize E(PW). Using an MARR of 18% per year, the investment required in year 3, and the estimated cash flows for years 4 through 6, determine which decision should be made in year 3. D6 X Y Z High (X) Low (X) High (Y) Low (Y) High High (Z) Low (Z) Low High Low High Investment, Cash Flow, (Year Cash Flow, $1000 Year 3 3) (Year 4) 3 4 $-260,000 $50 $40 $30 $30 $190 $-30 Low $-52,000 $-250,000 The present worth of X is $ The present worth of Y is $ The present worth of Z is $ Select decision branch Y Cash Flow, $1000 (Year 5) 5 $50 $30 $40 $30 $170 $-30 Cash Flow, $1000 (Year 6) 6 $50 $20 $50 $30 $150 $-30 Outcome Probability 0.72 0.28 0.45 0.55 0.7 0.3
Jiminez Company has two investment opportunities. Both investments cost $5,000 and will provide the following net cash flows: Year 1 2 3 4 What is the total present value of Investment A's cash flows assuming an 10% minimum rate of return? Use Appendix Table 2. (Do not round your intermediate calculations. Round your answer to the nearest whole dollar.) Multiple Choice O O Investment A $3,000 3,000 3,000 3,000 O O $4,510. $3,452. $3,000. Investment B $3,000 4,000 2,000 1,000 $10,628.
Problem #2: Consider an investment where the cash flows are: - $920.33 at time 1 = 0 (negative since this is your initial investment) S407 at time = 1 in years $222 at time = 2 in years $426 at time = 3 in years (a) Use Excel's "Solver" to find the internal rate of return (IRR) of this investment. Take a screen shot showing Solver open with your entries for the function clearly visible. Paste the screen shot into an application (like Paint), and save it as a (.png) file. Upload your screenshot below. (b) What is the value of IRR found by Solver?
K (Present value of annuities and complex cash flows) You are given three investment alternatives to analy End of Year 1 5678AWN2 3 A $15,000 15,000 15,000 15,000 15,000 Investment B $15,000 15,000 15,000 15,000 C $20,000 60,000 a. What is the present value of investment A at an annual discount rate of 19 percent? (Round to the nearest cent.) BELEID
Terri Allessandro has an opportunity to make any of the following investments: The purchase price, the lump-sum future value, and the year of receipt are given below for each investment. Terri can earn a rate of return of 6% on investments similar to those currently under consideration. Evaluate each investment to determine whether it is satisfactory, and make an investment recommendation to Terri. The present value, PV Data table Investment A Purchase Price Future Value Year of Receipt $20,032 $28,000 5 B $402 $1,000 21 с $3,266 $7,000 11 D $4,173 $20,000 46 (Click on the icon located on the top-right corner of the data table below in order to copy its contents into a spreadsheet.) Print Done ×
1.4 The table represents the cash flows received from the investments at the end year. Each investment requires an initial investment of $1000. Answer the questions related to the two investment opportunities in the table below. Year 1 2 3 4 5 Investment A 225 215 250 225 205 Investment B 220 225 250 250 210 There are two approaches to evaluate this investment. Show the necessary calculations. • Assume the interest rate ot 4.33%. Use present value analysis to determine which investment you should choose? Calculating the rate of returns of the investment, which investment would you choose and why?
Present value of annuities and complex cash flows) You are given three investment alternatives to analyze. The cash flows from these three investments are as follows: End of Year 1 2 3 45678 A $13,000 13,000 13,000 13,000 13,000 Investment B $13,000 13,000 13,000 13,000 C $ 18,000 54,000 a. What is the present value of investment A at an annual discount rate of 25 percent? (Round to the nearest cent.) b. What is the present value of investment B at an annual discount rate of 25 percent? (Round to the nearest cent.) c. What is the present value of investment C at an annual discount rate of 25 percent? (Round to the nearest cent.)
What is the present value of an investment with the following cash flows? Year 1 $14,000 Year 2 $20, 000 Year 3 $30,000 Year 4. $ 43,000 Year 5. $ 57,000 Use a 7% discount rate, and round your answer to the nearest $1. a. $128, 487 b. $107, 328 c. $112, 346 d. $ 153, 272
Find the Payback period for Oman Lighting company if the initial investment is 12000 OMR and the cash Inflows are as follows: Year 1 =3250 OMR; Year 2 =3500 OMR; Year 3=3750 OMR and Year 4=4000 OMR. Select one: a. None of the options b. 3 years 4 months c. 2 years 8 months d. 1 year 10 months e. 3 years
Dixon Sisters has a project with the after-tax cash flows shown below. The required return (cost of capital) on the investment is 10%. Compute the: Payback b. Discounted payback c. NPV d. Profitability index e. IRR MIRR YEAR 0 1 2 3 4 Cash flow −70,000 30,000 30,000 30,000 20,000
Investment Opportunity Cash Flows in $ 1 3 1,100 $ (500) $ Suppose you are presented with the investment opportunity described in the table above Assume the applicable annual interest rate is 4.75% Calculate the NPV of this investment. Round your answer to two decimals (Do not include the S-sign in your answer, enter negative values with a minus sign and not in parentheses) Year Benefits Costs 2731.16 0 $ $ 350 $ $ (1,100) $ (1,300) $ 2 500 $ (1,500) $ 4 1,500 $ (400) 5 5,000

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