212F4b2fdONuXXgZX2DTmgiz56EF3ASubject TestNote: -You are attempting question 4 out of 12The company is considering two projects. The initial investment in the Project A and Bare $50,000 and $60,000 respectively. The Project A will generate annual cash flows of$26,000 for four years and the Project B will generate annual cash flows of $30,000 forfour years. What must be the required rate of return, so that the company will beindifferent between these two projects?(A)The required rate of return must be 21.86%.(B) The required rate of return must be 37.42%.(C) The required rate of return must be 34.90%.(D)The required rate of return must be 31.39%.AnswerO AOBOD

Initial Investment Project A = 50,000 Project B = 60,00 Annual Cash Flows Project A = 26,000…

Answered: Note: You are attempting question 4 out…

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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A project that costs $2,300 to install will provide annual cash flows of $730 for each of the next 5 years. a. Calculate the NPV if the opportunity cost of capital is 12%? (Do not round intermediate calculations. Round your answer to 2 decimal places.) NPV b. Is this project worth pursuing? Yes O No c. What is the project's internal rate of return IRR? (Do not round intermediate calculations. Round your answer to 2 decimal places.) %24
1. A project requires an initial capital cost of (40 million ID). The investor expects the project will generate annual returns of (12 million ID), with expenditures about (4 million ID) annually. If you know that the economic life is (12) years, and the salvage value after the end of the economic life is (4 million ID). Considering that the less acceptable interest rate for the investor is (10%): A. Determining the economic feasibility for investing using the present worth method? B. What is the equivalent annual worth of this investment? C. Find the internal rate of return?
Benjamin was evaluating the feasibility of a project that has an initial investment of $215,000 and subsequent investments of $155,000 in the 1st and 2nd years. From the 3rd year onwards, it will generate cost savings of $250,000 every year for 9 years. a. If the project has a terminal value of $110,000, what is the Internal Rate of Return (IRR)? % Round to two decimal places b. Should the project be accepted if the company's cost of capital is 25.00%? (click to select) Yes No
A company has to make a decision about expanding its production facilities. Research indicates that the desired expansion would require an immediate outlay of $130,000 and an outlay of a further $20,000 in 3 years. The net cash returns are shown below. Find the net present value of the project. According to the net present value criterion, should the expansion project be undertaken if the required rate of return is 10%? Year 1 to Year 8 Year 9 to Year 12 $22,000 per year $18,000 per year The net present value of the expansion project is $ (Round the final answer to the nearest dollar as needed. Round all intermediate values to six decimal places as needed.)
24. You are evaluating a project that will cost $534,000, but is expected to produce cash flows of $128,000 per year for 10 years, with the first cash flow in one year. Your cost of capital is 11% and your company's preferred payback period is three years or less. a. What is the payback period of this project? b. Should you take the project if you want to increase the value of the company? a. What is the payback period of this project? The payback period is ____years. b. If you want to increase the value of the company you (will/will not) take the project since the NPV is (negative/positive) **round to two decimal places**
Can you show me how this is done? Emily Company has a minimum required rate of return of 9%. It is considering investing in a project that costs $90,671 and is expected to generate cash inflows of $23,576 at the end of each year for three years. The profitability index for this project is Round your answer to 2 decimal places. Selected Answer: 65 Correct Answer: 0.66 ± 0.05
Your answer is partially correct. Sunland Company is considering a long-term investment project called ZIP. ZIP will require an investment of $123,600. It will have a useful life of 4 years and no salvage value. Annual cash inflows would increase by $82,400, and annual cash outflows would increase by $41,200. The company's required rate of return is 12%. Click here to view the factor table. Calculate the internal rate of return on this project. (Round answers to whole number (e.g., 15%).) Internal rate of return on this project is between 3 % and 1539 % Determine whether this project should be accepted? The project should be accepted.
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K- Consider a project with free cash flow in one year of $140,702 or $180,360, with either outcome being equally likely. The initial investment required for the project is $80,000, and the project's cost of capital is 17%. The risk-free interest rate is 5% (Assume no taxes or distress costs) a. What is the NPV of this project? b. Suppose that to raise the funds for the initial investment, the project is sold to investors as an all-equity firm. The equity holders will receive the cash flows of the project in one year. How much money can be raised in this way-that is, what is the initial market value of the unlevered equity? c. Suppose the initial $80,000 is instead raised by borrowing at the risk-free interest rate. What are the cash flows of the levered equity, and what is its initial value according to M&M? a. What is the NPV of this project? The NPV is $ 57200 (Round to the nearest dollar) b. Suppose that to raise the funds for the initial investment, the project is sold to investors…
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Giant Equipment Ltd. is considering two projects to invest next year. Both projects have the same start-up costs. Project A will produce annual cash flow of $42 000 at the beginning of each year for eight years. Project B will produce cash flow of $48 000 at the end of each year for seven years. The company requires a 12% return. Required:a. Whichprojectshouldthecompanyselectandwhy?b. Which project should the company select if the interest rate is 14% andthe cash flow in Project B is also at the beginning of each year?Please give me subheading answer.
What information does the payback period provide? Suppose Omni Consumer Products's CFO is evaluating a project with the following cash inflows. She does not know the project's initial cost; however, she does know that the project's regular payback period is 2.5 years. Year Year 1 Cash Flow $375,000 Year 2 $450,000 Year 3 $400,000 Year 4 $400,000 If the project's weighted average cost of capital (WACC) is 10%, what is its NPV? $261,541 $313,849 $287,695 $222,310 Which of the following statements indicate a disadvantage of using the discounted payback period for capital budgeting decisions? Check all that apply. ㅁㅁ The discounted payback period is calculated using net income instead of cash flows. The discounted payback period does not take the project's entire life into account. The discounted payback period does not take the time value of money into account.

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