Look at the cash flows for projects F and G given below. Cash Flows ($) Project Co F G Project F Project G C6 C8 C1 C2 C3 (6,000) 4,400 4,400 4,400 C4 C5 0 0 0 0 52.8 4,942 (6,000) 2,200 2,200 2,200 2,200 2,200 2,200 2,200 2,200 32.9 5,737 Project F Project G The cost of capital was assumed to be 10%. Assume that the forecasted cash flows for projects of this type are overstated by 8% on average. That is, the forecast for each cash flow from each project should be reduced by 8%. But a lazy financial manager, unwilling to take the time to argue with the projects' sponsors, instructs them to use a discount rate of 18%. a. What are the projects' true NPVS? (Do not round intermediate calculations. Round your answers to nearest dollar amount.) NPV at 10% IRR (8) C7 0 NPV at 10% NPV at 18% b. What are the NPVs at the 18% discount rate? (Do not round intermediate calculations. Round your answers to nearest dollar amount.)

Look at the cash flows for projects F and G given below. Cash Flows ($) Project Co F G Project F Project G C6 C8 C1 C2 C3 (6,000) 4,400 4,400 4,400 C4 C5 0 0 0 0 52.8 4,942 (6,000) 2,200 2,200 2,200 2,200 2,200 2,200 2,200 2,200 32.9 5,737 Project F Project G The cost of capital was assumed to be 10%. Assume that the forecasted cash flows for projects of this type are overstated by 8% on average. That is, the forecast for each cash flow from each project should be reduced by 8%. But a lazy financial manager, unwilling to take the time to argue with the projects' sponsors, instructs them to use a discount rate of 18%. a. What are the projects' true NPVS? (Do not round intermediate calculations. Round your answers to nearest dollar amount.) NPV at 10% IRR (8) C7 0 NPV at 10% NPV at 18% b. What are the NPVs at the 18% discount rate? (Do not round intermediate calculations. Round your answers to nearest dollar amount.)

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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Net Cash Flows and NPVs for different discount rate for projects S and L are given below Net Cash Flows ($) Discount Rate (%) NPVS NPVL Year (t) Project S Project L 0% $800 $1100 0 $(3000) $(3000) 5 554.32 1 1500 400 10 161.33 2 1200 900 15 (90.74) (259.24) 3 800 1300 20 (309.03) (565.97) 4 300 1500 e) What is the IRR for L? (Write down the equation for IRR and then Use an excel worksheet to calculate IRR Equation: Answer: f) What is the cross-over rate? (Write down the equation for IRR and then Use an excel worksheet to calculate IRR Equation: ANSMER:
. Net Cash Flows and NPVs for different discount rate for projects S and L are given below Net Cash Flows ($) Discount Rate (%) NPVS NPVL Year (t) Project S Project L 0% $800 $1100 0 $(3000) $(3000) 5 554.32 1 1500 400 10 161.33 2 1200 900 15 (90.74) (259.24) 3 800 1300 20 (309.03) (565.97) 4 300 1500 h) If projects are independent (not mutually exclusive), which project(s) would you accept? i) at 5% ii) at 15%
Consider two investments with the fo llowing sequences of cash flows:Net Cush FlowII Project A Project B0 -$30.000 -$15,000I $2,000 $LO,OOO2 $6,000 $10,0003 $12,000 $10,0004 $24 .000 $10,0005 $28,000 $5.000(a) Compute the r:' for each investment.(b) Plot the present-worth curve for each project on the same chart and find the interest rate that makes the two projects equivalent.(c) Tf A and Bare mutually exclusive investment projects, which project is more economically desirable at MARR of 15%?
Consider the following projects: Project Co C₁ Cash Flows ($) C2 C3 CA C5 A -1,300 1,300 0 0 0 0 B -2,600 1,300 1,300 4,300 1,300 1,300 C -3,250 1,300 1,100 0 1,300 1,300 a. If the opportunity cost of capital is 9%, which project(s) have a positive NPV? b. Calculate the payback period for each project. c. Which project(s) would a firm using the payback rule accept if the cutoff period is three years? Complete this question by entering your answers in the tabs below. Required A Required B Required C If the opportunity cost of capital is 9%, which project(s) have a positive NPV? Note: Do not round intermediate calculations. Positive NPV project(s) Projects B and C Required A Required B
You are given the following cash flow information for Project A TV Inflows Year 0 PV Outflows -$150,000.00 1 Project A -$150,000.00 $80,000.00 -$25,000.00 $50,000.00 2 $80,000.00 -$30,000.00 $75,000.00 Totals 3 4 5 6 O 19.33% $75,000.00 Now assume that the project's cost of capital is 16.0 percent, but that its true reinvestment rate is 24.0 percent. Given this information, determine the project's modified internal rate of return (MIRR). Ⓒ 18.56% 5 pts
Net Cash Flows and NPVs for different discount rate for projects S and L are given below Net Cash Flows ($) Discount Rate (%) NPVS NPVL Year (t) Project S Project L 0% $800 $1100 0 $(3000) $(3000) 5 554.32 1 1500 400 10 161.33 2 1200 900 15 (90.74) (259.24) 3 800 1300 20 (309.03) (565.97) 4 300 1500 a) Calculate the payback period in years for the Project S and Project L i) Payback for Project S: ii) Payback for Project L: c) Calculate NPVS for 5% and NPVL for 10%. Fill the table i) NPVS at 5%: ii) NPVS at 10%: d) What is the IRR for S? (Write down the equation for IRR and then Use an excel worksheet to calculate IRR Equation: Answer: e) What is the IRR for S? (Write down the equation for IRR and then Use an excel worksheet to calculate IRR Equation: Answer: f) What is the cross-over rate? (Write down the equation for IRR and then Use…
2) You have 3 projects with the following cash flows: Year 0 1 2 3 4 Project 1 -$150 $20 $40 $60 $80 Project 2 -825 0 0 7,000 -6,500 Project 3 20 40 60 80 -245 For which of these projects is the IRR rule reliable?
Problem 1: Consider the following cash flows and assume i = 10% for all analyses purposes: Project Cash Flows A D -$2,500 -$7,000 -$5,000 -$5,000 1 $650 -$2,500 -$2,000 -$500 2 $650 -$2,000 -$2,000 -$500 $650 -$1,500 -$2,000 $4,000 4 $600 -$1,500 -$2,000 $3,000 5 $600 -$1,500 -$2,000 $3,000 $600 -$1,500 -$2,000 $2,000 7 $300 -$2,000 $3,000 8 $300 a) Compute the project balances for Projects A and D, as a function of project year b) Compute the future worth values for Projects A and D at the end of service life. c) Suppose that Projects B and C are mutually exclusive. Assume also that the required service period is eight years and that the company is considering leasing comparable equipment that has an annual lease expense of $3,000 for the remaining years of the required service period for both projects. Which project is the better choice?
JJ. 173.
Look at the cash flows for projects F and G given below. Cash Flows ($) NPV IRR at Project со F G C1 C2 C3 C4 (15,000) 7,200 7,200 7,200 Ө (15,000) 3,600 3,600 3,600 3,600 3,600 3,600 3,600 3,600 17.3 4,206 C5 C6 C7 Cg (%) 10% 0 Ө Ө Ө 20.7 2,905 The cost of capital was assumed to be 10%. Assume that the forecasted cash flows for projects of this type are overstated by 7% on average. That is, the forecast for each cash flow from each project should be reduced by 7%. But a lazy financial manager, unwilling to take the time to argue with the projects' sponsors, instructs them to use a discount rate of 17%. a. What are the projects' true NPVs? (Do not round intermediate calculations. Round your answers to nearest dollar amount.) Project F Project G NPV at 10% b. What are the NPVs at the 17% discount rate? (Do not round intermediate calculations. Round your answers to nearest dollar amount.) Project F Project G NPV at 17%
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