An ongoing business should be able to produce cash flows as listed below. It's offered for sale at a price of $1.5 million, and most interested buyers understand the current owner will unlikely acceptanything less. If an appropriate opportunity cost of money is 9.0%, what is the value of this business for anyone who buys today from the owner?• Year 1 - $305,000Year 2$327,000●●●●Year 3- $348,500Year 4- $385,000Year 5 - $422,000

Value of business is the present value of cash flow from the business based on the time and interest…

n ongoing business should be able to produce cash flows as listed below. It's offered for sale at a price of $1.5 million, and most interested buyers understand the current owner will unlikely nything less. If an appropriate opportunity cost of money is 9.0%, what is the value of this business for anyone who buys today from the owner? • Year 1-$305,000 • Year 2-$327,000 • Year 3- $348,500 Year 4-$385,000 400.000

n ongoing business should be able to produce cash flows as listed below. It's offered for sale at a price of $1.5 million, and most interested buyers understand the current owner will unlikely nything less. If an appropriate opportunity cost of money is 9.0%, what is the value of this business for anyone who buys today from the owner? • Year 1-$305,000 • Year 2-$327,000 • Year 3- $348,500 Year 4-$385,000 400.000

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 are offered a chance to buy an asset for $4,000 that is expected to produce cash flows of $750 at the end of Year 1, $1,000 at the end of Year 2, $850 at the end of Year 3. and $6,250 at the end of Year 4. What rate of return would you earn if you bought this asset? Select the correct answer. a. 28.08% b. 26.48% с. 28.88% d. 25.68% e. 27.28%.
You are offered the opportunity to invest $95 000 in a business which will yield annual net cash inflows of $18 000 for a period of 8 years. What is the net present value of your investment? a. $86 603 b. $1029 c. $49 000 d. $46 000
You are offered a chance to buy an asset for $7,250 that is expected to produce cash flows of $750 at the end of Year 1, $1,000 at the end of Year 2, $850 at the end of Year 3, and $6,250 at the end of Year 4. What rate of return would you earn if you bought this asset? a. 5.19% b. 5.46% Ⓒc. 6.05% d. 5.75% e. 4.93%
181 An investor is considering a business opportunity with the anticipated re- ceipts and disbursements shown in the following table. Calculate the net cash flow representing this investment, and then find the present worth of the net cash flow for an interest rate of 0% and 12%. Answer: $175,000; –$12,915 End of Year Disbursements Receipts $300,000 75,000 25,000 30,000 $ 20,000 60,000 1 135,000 180,000 210,000 4
A company has two investment possibilities, with the following cash inflows: Investment Year 1 Year 2 Year 3 A $1,000 1,400 1,800 B $1,700 1,700 1,700 If the firm can earn 6 percent in other investments, what is the present value of investments A and B? Use Appendix B and Appendix D to answer the question. Round your answers to the nearest dollar.PV(Investment A): $ __________PV(Investment B): $ __________ If each investment costs $4,000, is the present value of each investment greater than the cost of the investment? The present value of investment A is __less than___ / __greater than__ the cost. The present value of investment B is __less than___ / __greater than__ cost.
Your company seeks to take over Good Deal Company. Your company’s offer for Good Deal is $3,000,000 in cash upon signing the agreement followed by 10 annual payments of $300,000 starting one year later. The time value of money is 10%. What is the present worth of your company’s offer? a. $3,000,000 b. $2,281,830 c. $4,843,380 d. $5,281,830
Instruction: Use the table below to acquire information and answer the following questions. Please do not use signs like Rs., $, % etc in your answer. If you calculate percentage as 10.23% than answer must write like 10.23 only (do not write like 10.23% or 0.1023) Year 0 1 2 3 4 Cash flows −$950 $525 $485 $445 $405 Ms ABC is considering an opportunity of a new investment that has the following cash flow and weighted average cos of capital is 13 percent. What is the project's discounted payback in years? Answer should correct up to 2 decimal places. Ms ABC is considering an opportunity of a new investment that has the following cash flow and weighted average cos of capital is 13 percent. What is the project's net present value? Ms ABC is considering an opportunity of a new investment that has the following cash flow and weighted average cos of capital is 13 percent. What is the project's profitability index? Answer should correct up to 2…
A company has two investment possibilities, with the following cash inflows: Investment Year 1 Year 2 Year 3 A $1,500 1,900 2,200 B $1,400 1,400 1,400 If the firm can earn 6 percent in other investments, what is the present value of investments A and B? Use Appendix B and Appendix D to answer the question. Round your answers to the nearest dollar.PV(Investment A): $ PV(Investment B): $ If each investment costs $4,000, is the present value of each investment greater than the cost of the investment?The present value of investment A is -Select-less than greater than Item 3 the cost.The present value of investment B is -Select-less than greater than Item 4 the cost.
► CRC Inc. is buying new equipment that has the following cash flows: Year Cash Flow O-$17.7 What is the NPV if the interest rate is $6%? O $482.24 D -$537.78 0 -$500 O $22.44 1 $100 2 $200 3 $250
Damien offers you a sequence of end-of-year cash flows for an investment as follows: Year 1 2 3 4 4 What is the value of the cash flows if the opportunity cost is 6 percent? (Round to the nearest dollar). Please click on the following link to access a blank worksheet Click to open:: O $8.392 $8.598 Cash Flow $4,000 $3,000 $2,000 $1,000 $8.734 $8.915
Assume a $55,000 investment and the following cash flows for two alternatives. Year Investment A Investment B $ 15,000 $35,000 1 2 25,000 10,000 20,000 15,000 25,000 3 4 20,000 a. Calculate the payback for investment A and B. (Round your answers to 2 decimal places.) Investment A years Investment B years b. Which investment would you select under the payback method? O Investment A O Investment B c. If the inflow in the fifth year for Investment A was $20,000,000 instead of $20,000, would your answer change under the payback method? Yes O No
A real estate investment has the following annual cash flows: 1 $45,000 2 $38,000 3 $52,000 4 $320,000 If you require a 12% return on your investments, would you be willing to pay $300,000 for this investment? (answer yes or no) Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a b yes no Your answer

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