Problem 1 Four alternative designs are being considered for a pet-exercising treadmill. The company's MARR is 18%. The cash flows associated with each are given in the following table. The Judas The Lancelot The Bella The Lilo Capital Investment $120,000 $50,000 $20,000 $23,000 $4,000 $130,000 $141,000 $50,000 $160,000 Annual Revenues Annual Expenses $50,000 $50,000 $14,000 $15,000 $15,000 $15,000 $13,000 $23,000 $4,000 $18,000 $5,000 Refurbishment Cost at EOY 5 Market Value after 10 years IR ??? 21.8% 21.6% 17.7% Here are various interest tables you can use to look up factor values. 10% Interest Table Table 12% Interest Table 15% Interest Table 18% Interest 20% Interest Table 25% Interest Table Question 1 Use the trial and error method combined with linear interpolation to solve for the IRR of The Judas design (to one decimal place, XX.X%). In your supporting work, clearly state why you chose each interest rate to try. Question 2 Compute the FW (future worth) of The Lancelot. Remember to include your calculations in your supporting work. Round your answer to the nearest dollar.

Problem 1 Four alternative designs are being considered for a pet-exercising treadmill. The company's MARR is 18%. The cash flows associated with each are given in the following table. The Judas The Lancelot The Bella The Lilo Capital Investment $120,000 $50,000 $20,000 $23,000 $4,000 $130,000 $141,000 $50,000 $160,000 Annual Revenues Annual Expenses $50,000 $50,000 $14,000 $15,000 $15,000 $15,000 $13,000 $23,000 $4,000 $18,000 $5,000 Refurbishment Cost at EOY 5 Market Value after 10 years IR ??? 21.8% 21.6% 17.7% Here are various interest tables you can use to look up factor values. 10% Interest Table Table 12% Interest Table 15% Interest Table 18% Interest 20% Interest Table 25% Interest Table Question 1 Use the trial and error method combined with linear interpolation to solve for the IRR of The Judas design (to one decimal place, XX.X%). In your supporting work, clearly state why you chose each interest rate to try. Question 2 Compute the FW (future worth) of The Lancelot. Remember to include your calculations in your supporting work. Round your answer to the nearest dollar.

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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Annual cash inflows that will arise from two competing investment projects are given below: Investment A $ 3,000 4,000 5,000 6,000 $ 18,000 Year 1 2 3 4 The discount rate is 10% Click here to view Exhibit 148 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 1234 S S Investment B $6,000 5,000 4,000 3,000 $18,000 Present Value of Cash Flows Investment A 300 300 $ Investment B
Use the trial and error method combined with linear interpolation to solve for the IRR of The Judas design (to one decimal place, XX.X%)
Compute the NPV for Project X with the cash flows shown as follows if the appropriate cost of capital is 9 percent. Time: 1 2 3. 4 Cash flow: -1,000 -75 100 100 2,000 Multiple Choice $486.29 -$639.96 $392.44 $360.04 MacBook Air
ic Yo NS io cer ist bun ngs nnée Current Attempt in Progress Blossom Manufacturing Co. is evaluating two projects. The company uses payback criteria of three years or less. Project A has a cost of $905,000, and project B's cost is $1,247,300. Cash flows from both projects are given in the following table. Year 1 2 3 4 Project A $86,212 313,562 427,594 285,552 Project B $586,212 413,277 231,199 What are their discounted payback periods? (Round answers to 2 decimal places, e.g. 15.25. If discounted payback period exceeds life of the project, enter 0.00 for the answer.) Discounted payback period of project A Discounted payback period of project B will he accepted with a discount rate of 8 percent? átv zoom
ofice eBook Problem Walk-Through A company is analyzing two mutually exclusive projects, S and L, with the following cash flows: 1 2 3 4 Project S -$1,000 $878.81 $250 $15 $5 Project L -$1,000 $0 $240 $400 $782.91 The company's WACC is 8.5%. What is the IRR of the better project? (Hint: The better project may or may not be the one with the higher IRR.) Round your answer to two decimal places. %
An interior design studio is trying to choose between the following two mutually exclusive design projects: Year 0 1 2 3 Cash Flow Cash Flow (0) -$64,000 31,000 31,000 31,000 a-1 If the required return is 10 percent, what is the profitability index for both projects? (Round your answers to 3 decimal places. (e.g., 32.161)) Project I Project II -$18,000 9,700 9,700 9,700 Profitability Index a-2 If the company applies the profitability index decision rule, which project should the firm accept? O Project I O Project II Project I Project II b-1 What is the NPV for both projects? (Round your answers to 2 decimal places. (e.g., 32.16)) O Project I Project II NPV b-2lf the company applies the NPV decision rule, which project should it take?
Question 3 You are working as a finance manager for Fire Fox Transport Ltd. The company is considering to invest in one of the two following projects to buy a new equipment for their storage which is expected to boost the company’s revenue. Each equipment will last 5 years and have no salvage value at the end. The company’s required rate of return for all investment projects is 9.5%. The cash flows of the projects are provided below. Equipment 1 Equipment 2 Cost $157,000 $182,000 Future Cash Flows Year 1 Year 2 Year 3 Year 4 Year 5 67 000 82 000 78 000 64 000 56 000 83 000 94 000 80 000 77 000 73 000 Required: Identify which option of equipment should the company accept based on Net Present Value (NPV) method? Identify which option of equipment should the company accept based on discounted pay back method if the payback criterion is maximum 3 years?
Coffer Company is analyzing two potential investments. Project X Cost of machine Net cash flow: Year 1 Year 2 $ 85,470 Project Y $ 65,000 33,000 33,000 3,000 30,000 Year 3 Year 4 33,000 0 • 30,000 25,000 If the company is using the payback period méthod, and it requires a payback period of three years or less, which project(s) should be selected? Multiple Choice Project Y. Project X. Both X and Y are acceptable projects. Neither X nor Y is an acceptable project.
Question 2 Consider a 100,000 sqf office building with the following cash flows: The gross rent in year 1 is $30/sqf/year and the rents are expected to grow at 2% per year. The operating expenses in the first year are $5/sqf/year and are expected to increase at 3% per year. There are no capital expenditures. All cash flows are in arrears. The discount rate for the property is 9%. a. What is the value of the building if the building will be held and rented indefinitely? What is the cap rate at time 0? b. What is the value of the building if the building is sold at the end of 10 years at a 8% cap rate? What is the cap rate at time 0?
Living Colour Company has a project available with the following cash flows: Year 0 1 2 Cash Flow -$ 32,830 8,390 10,130 14,540 16,170 11,180 If the required return for the project is 9.3 percent, what is the project's NPV? sin 4 5 Multiple Choice O $27,580.00 O $5,790.94 O $14,037.83 O $12,958.00 $14,809.14
Project X cash flows is given on the timeline below 0. 2. 3 4. Project X -$10,000 $6.500 $3,000 $3.000 $1.000 Calculate Project X NPV if WACC-9% Round your answer to the nearest hundredth, have at least two decimal digits and write it in the Answer field. Would you accept or reject the project (write in the textbox below the answer field)?

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