Please answer part cPayback Period, IRR, and Minimum Cash FlowsThe management of Mesquite Limited is currently evaluating the following investment proposal:Time 0 Year 1 Year 2 Year 3 Year 4Initial investment $250,000Net operatingcash inflows$100,000 $100,000 $100,000 $100,000G(a) Determine the proposal's payback period.2.5years(*(b) Determine the proposal's internal rate of return. (Refer to Appendix 24B if you use the table approach.)22(c) Given the amount of the initial investment, determine the minimum annual net cash inflows required to obtain an internal rate of return of 8percent. Round the answer to the nearest dollar.$ 89,344 *

Internal rate of return refers to the rate of return that is being by the investor over the amount…

Payback Period, IRR, and Minimum Cash Flows The management of Mesquite Limited is currently evaluating the following investment proposal: Time 0 Year 1 Year 2 Year 3 Year 4 Initial investment $250,000 Net operating cash inflows $100,000 $100,000 $100,000 $100,000 (a) Determine the proposal's payback period. 2.5 ✔years

Payback Period, IRR, and Minimum Cash Flows The management of Mesquite Limited is currently evaluating the following investment proposal: Time 0 Year 1 Year 2 Year 3 Year 4 Initial investment $250,000 Net operating cash inflows $100,000 $100,000 $100,000 $100,000 (a) Determine the proposal's payback period. 2.5 ✔years

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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Payback Period, IRR, and Minimum Cash Flows The management of Mesquite Limited is currently evaluating the following investment proposal: Year 4 Initial investment $260,000 Net operating cash inflows Time 0 Year 1 Year 2 Year 3 -- $100,000 $100,000 $100,000 $100,000 (a) Determine the proposal's payback period. 2.6 years % (b) Determine the proposal's internal rate of return. (Refer to Appendix 24B if you use the table approach.) (c) Given the amount of the initial investment, determine the minimum annual net cash inflows required to obtain an internal rate of return of 16 percent. Round the answer to the nearest dollar. $
Following is information on two alternative investments being considered by Jolee Company. The company requires a 8% return from its investments. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Project A Project B Initial investment $ (172,325 ) $ (146,960 ) Expected net cash flows in: Year 1 50,000 31,000 Year 2 43,000 44,000 Year 3 89,295 60,000 Year 4 90,400 77,000 Year 5 54,000 33,000 a. For each alternative project compute the net present value.b. For each alternative project compute the profitability index. If the company can only select one project, which should it choose?
Phoenix Company is considering investments in projects C1 and C2. Both require an initial investment of $330,000 and would yield the following annual net cash flows. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Net cash flows Project C1 Project C2 Year 1 $ 46,000 $ 130,000 Year 2 142,000 130,000 Year 3 202,000 130,000 Totals $ 390,000 $ 390,000 a. The company requires a 8% return from its investments. Compute net present values using factors from Table B.1 in Appendix B to determine which projects, if any, should be accepted.b. Using the answer from part a, is the internal rate of return higher or lower than 8% for (i) Project C1 and (ii) Project C2? Hint: It is not necessary to compute IRR to answer this question.
Required: 1a. Compute the cash payback period for each project. Cash Payback Period Plant Expansion 2 years Retail Store Expansion 2 years 1b. Compute the net present value. Use the present value of $1 table above. If required, round to the nearest dollar. Plant Expansion Retail Store Expansion Total present value of net cash flow Less amount to be invested Net present value 78,782 73,933 2. Because of the timing of the receipt of the net cash flows, the plant expansion offers a higher net present value
Redesign Inc. is considering a project that has the following cash flow data. What is the project's payback period and discounted payback period? Assume the cost of capital is 12%. Year 0 1 2 3 Cash flows -$500 $200 $200 $200
ok ht ences A firm evaluates all of its projects by applying the IRR rule. A project under consideration has the following cash flows: Year 0 1 2 3 Cash Flow IRR -$27,400 11,400 14,400 10,400 If the required return is 16 percent, what is the IRR for this project? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) % Should the firm accept the project? Yes O No
A firm evaluates all of its projects by applying the NPV decision rule. A project under consideration has the following cash flows: Year 0 1 2 WN 3 NPV Cash Flow What is the NPV for the project if the required return is 12 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) -$ 29,000 13,000 16,000 12,000 At a required return of 12 percent, should the firm accept this project? NPV Yes O No What is the NPV for the project if the required return is 24 percent? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
The management of Peridot Inc. is submitting a proposal to the Board of Directors for a new facility with the following cash flows. Year Cash flow 0 -214 1 52 2 61 3 74 4 82 The company's hurdle rate is 9%. internal rate of return for the proposed project is closest to: A. 10.15%. B. 9.06%. C. 9.00%.
Questions: Crowell Company is considering two capital investments. Both investments have an initial cost of $9,000,000 and total net cash inflows of $17,000,000 over 10 years. Crowell requires a 15% rate of return on this type of investment. Expected net cash inflows are as follows: Requirements - X 1. Use Excel to compute the NPV and IRR of the two plans. Which plan, if any, should the company pursue? 2. Explain the relationship between NPV and IRR. Based on this relationship and the company's required rate of return, are your answers as expected in Requirement 1? Why or why not? 3. After further negotiating, the company can now invest with an initial cost of $8,100,000. Recalculate the NPV and IRR. Which plan, if any, should the company pursue? Print Done Data Table Year Plan Alpha Plan Beta 1 1,700,000 $ 1,700,000 2 1,700,000 2,400,000 1,700,000 3,100,000 4 1,700,000 2,400,000 1,700,000 1,700,000 6 1,700,000 1,600,000 1,700,000 1,300,000 8 1,700,000 1,000,000 9 1,700,000 700,000…
Annual cash inflows from two competing investment projects are given below: Investment A $ 4,000 5,000 6,000 7,000 $ 22,000 Year 1234 The discount rate is 10%. Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using tables. Required: Compute the present value of the cash inflows for each investment. Year 1 2 3 4 $ Investment B $ 7,000 6,000 5,000 4,000 $ 22,000 Present Value of Cash Flows Investment A 0 $ Investment B 0 M ...
A firm evaluates all of its projects by applying the IRR rule. A project under consideration has the following cash flows: Year 0 Cash Flow -$ 27,800 1 11,800 -23 3 14,800 10,800 If the required return is 18 percent, what is the IRR for this project? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) IRR %
The following table contains the estimated cash flows of a project. Assume the appropriate discount rate (hurdle rate) is 14%. Year Operating Cash Flow 0 -$20,000 1 $7,000 2 $8,000 3 $9,000 4 $4,000 a. What is the payback period of project 1?

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