Monson Company is considering three investment opportunities with cash flows as described below: Project A: Cash investment now $15,000 Cash inflow at the end of 5 years $21,000 Cash inflow at the end of 8 years $30,000 Project B: Cash investment now $11,000 Annual cash outflow for 5 years $3,000 Additional cash inflow at the end of 5 years $25,000 Project C: Cash investment now $21,000 Annual cash inflow for 4 years $8,000 Cash outflow at the end of 3 years $10,000 Additional cash inflow at the end of 4 years $10,000 needed Compute the net present value of each project assuming Monson Company uses a 12% discount rate.
Monson Company is considering three investment opportunities with cash flows as described below: Project A: Cash investment now $15,000 Cash inflow at the end of 5 years $21,000 Cash inflow at the end of 8 years $30,000 Project B: Cash investment now $11,000 Annual cash outflow for 5 years $3,000 Additional cash inflow at the end of 5 years $25,000 Project C: Cash investment now $21,000 Annual cash inflow for 4 years $8,000 Cash outflow at the end of 3 years $10,000 Additional cash inflow at the end of 4 years $10,000 needed Compute the net present value of each project assuming Monson Company uses a 12% discount rate.
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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Question
Monson Company is considering three investment opportunities with cash flows as described below:
|
Project A: |
Cash investment now |
$15,000 |
|
|
|
$21,000 |
|
|
Cash inflow at the end of 8 years |
$30,000 |
|
Project B: |
Cash investment now |
$11,000 |
|
|
Annual |
$3,000 |
|
|
Additional cash inflow at the end of 5 years |
$25,000 |
|
Project C: |
Cash investment now |
$21,000 |
|
|
Annual cash inflow for 4 years |
$8,000 |
|
|
Cash outflow at the end of 3 years |
$10,000 |
|
|
Additional cash inflow at the end of 4 years |
$10,000 |
needed
Compute the
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