Lakelord Company is considering two mutually exclusive projects, A and B. Project A costs $94072 and is expected to generate $56196 in year one and $67090 in year two. Project B costs $118377 and is expected to generate $52195 in year one, $60452 in year two, $62774 in year three, and $47559 in year four. The firm's required rate of return for these projects is 0.060. The net present value for Project A is Instruction: Type ONLY your numerical answer in the unit of dollars, NO $ sign, NO comma, and round to the nearest whole number. E.g.. if your answer is $7,001.56, should type ONLY the number 7002, NEITHER 7,001.6, $7001.6, $7.001.6, NOR 7001.56. Otherwise, Blackboard will treat it as a wrong answer.

Lakelord Company is considering two mutually exclusive projects, A and B. Project A costs $94072 and is expected to generate $56196 in year one and $67090 in year two. Project B costs $118377 and is expected to generate $52195 in year one, $60452 in year two, $62774 in year three, and $47559 in year four. The firm's required rate of return for these projects is 0.060. The net present value for Project A is Instruction: Type ONLY your numerical answer in the unit of dollars, NO $ sign, NO comma, and round to the nearest whole number. E.g.. if your answer is $7,001.56, should type ONLY the number 7002, NEITHER 7,001.6, $7001.6, $7.001.6, NOR 7001.56. Otherwise, Blackboard will treat it as a wrong answer.

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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Bhadiben
Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2.9 million. The fixed asset will be depreciated straight-line to zero over its three year tax life, after which time it will be worthless. The project is estimated to generate $2,190,000 in annual sales, with costs of $815,000. The tax rate is 35%. What is the NPV of the project if the required rate of return is 12% O $47,523 O $59,255 O $68.991 O $52.648
Walsh Company is considering three independent projects, each of which requires a $3 million investment. The estimated internal rate of return (IRR) and cost of capital for these projects are presented here: Project H (high risk): Cost of capital Project M (medium risk): Project L (low risk): Cost of capital Cost of capital = 15% = 11% = 8% IRR = 19% IRR = 12% IRR = 7% Note that the projects' costs of capital vary because the projects have different levels of risk. The company's optimal capital structure calls for 50% debt and 50% common equity, and it expects to have net income of $4,443,000. If Walsh establishes its dividends from the residual dividend model, what will be its payout ratio? Round your answer to two decimal places. %
Mulroney Corp. is considering two mutually exclusive projects. Both require an initial investment of $11,500 at t = 0. Project X has an expected life of 2 years with after-tax cash inflows of $6,900 and $7,700 at the end of Years 1 and 2, respectively. In addition, Project X can be repeated at the end of Year 2 with no changes in its cash flows. Project Y has an expected life of 4 years with after-tax cash inflows of $4,400 at the end of each of the next 4 years. Each project has a WACC of 8%. Using the replacement chain approach, what is the NPV of the most profitable project? Do not round the intermediate calculations and round the final answer to the nearest whole number. a. $3,399 b. $3,925 c. $3,073 d. $2,768 e. $3,620
Portland Gaming, Inc. uses payback to evaluate potential projects and has a required payback period of four years for all projects. Currently, Portland is evaluating two independent projects. Project A has an expected payback period of 3.6 years and a net present value of $8,400. Project B has an expected payback period of 4.2 years with a net present value of $26,800. Which projects should be accepted based on the payback decision rule? Group of answer choices Project A only Project B only Both A and B Neither A nor B Answer cannot be determined based on the information given.
Atlas Corp. is considering two mutually exclusive projects. Both require an initial investment of $11,500 at t = 0. Project S has an expected life of 2 years with after-tax cash inflows of $6,000 and $7,600 at the end of Years 1 and 2, respectively. Project L has an expected life of 4 years with after-tax cash inflows of $4,283 at the end of each of the next 4 years. Each project has a WACC of 9.00%, and Project S can be repeated with no changes in its cash flows. The controller prefers Project S, but the CFO prefers Project L. How much value will the firm gain or lose if Project L is selected over Project S, i.e., what is the value of NPVL - NPVS? a. $1,501.42 b. $1,014.46 c. $ 1,783.84 d. $1,636.55 e. $1,313.76
Lakelord Company is considering two mutually exclusive projects, A and B. Project A costs $89977 and is expected to generate $64801 in year one and $66409 in year two. Project B costs $110404 and is expected to generate $58366 in year one, $62248 in year two, $68386 in year three, and $49405 in year four. The firm's required rate of return for these projects is 0.071. The net present value for Project A is Instruction: Type ONLY your numerical answer in the unit of dollars, NO $ sign, NO comma, and round to the nearest whole number. E.g., if your answer is $7,001.56, should type ONLY the number 7002, NEITHER 7,001.6, $7001.6, $7,001.6, NOR 7001.56. Otherwise, Blackboard will treat it as a wrong answer.
Crockett Graphic Designs Inc. is considering two mutually exclusive projects. Both projects require an initial after-tax investment of $11,000 and are typical average-risk projects for the firm. Project A has an expected life of 2 years with after-tax cash inflows of $6,000 and $8,000 at the end of Years 1 and 2, respectively. Project B has an expected life of 4 years with after-tax cash inflows of $5,000 at the end of each of the next 4 years. The firm's WACC is 10%. a. If the projects cannot be repeated, which project should be selected if Crockett uses NPV as its criterion for project selection? Project should be selected. b. Assume that the projects can be repeated and that there are no anticipated changes in the cash flows. Use the replacement chain analysis to determine the NP of the project selected. Do not round intermediate calculations. Round your answer to the nearest cent. Since Project 's extended NPV = $ , it should be selected over Project A ~ with an…
Disposable Containers Corp. (DCC) is considering a large plant expansion/modernization which will cost $98 million initially and another $62 million at the end of year 3. This project is expected to produce incremental after-tax profits of $29 million, $32 million, $26 million, $42 million, $40 million and $31 million to be received at the end of years 1, 2, 3, 4, 5 and 6 respectively. If the WACC is 9%, what is the project’s NPV? (Start by drawing a timeline.)
Your firm is considering a project that would cost $325,000 and be depreciated straight-line over four years to $0 book value. Your firm estimates $15,000 in yearly after-tax operating costs. The required return is 12.0 percent, and the firm pays a 21.0 percent tax rate. What is the equivalent annual cost of this project?
Bidump Corporation is evaluating two mutually exclusive capital budgeting projects. Project W2, which costs $210,000, is expected to generate $51,400 for six years and Project 5, which costs $104,000, it expected to $45,200 for six years. Bidump's required rate of return is 11 percent. What is the internal rate of return (IRR) of the project the company should purchase) Do not round intermediate calculations. Round your answer to two de places. -Select- should be purchased. Its IRR is N
Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2.32 million. The fixed asset falls into the three-year MACRS class (MACRS schedule). The project is estimated to generate $1.735 million in annual sales, with costs of $650,000. The project requires an initial investment in net working capital of $250,000, and the fixed asset will have a market value of $180,000 at the end of the project. The tax rate is 21 percent. a. What is the project’s Year 0 net cash flow? Year 1? Year 2? Year 3? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answers in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89.) b. If the required return is 12 percent, what is the project's NPV? (Do not round intermediate calculations and enter your answers in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89.)

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