Problem 9-18 NPV and Discount Rates [LO1]An investment has an installed cost of $533,800. The cash flows over the four-year lifeof the investment are projected to be $215,850, $232,450, $199,110, and $147,820,respectively.a. If the discount rate is zero, what is the NPV? (Do not round intermediatecalculations.)b. If the discount rate is infinite, what is the NPV? (A negative answer should beindicated by a minus sign.)c. At what discount rate is the NPV just equal to zero? (Do not round intermediatecalculations and enter your answer as a percent rounded to 2 decimal places, e.g.,32.16.)a. NPVb. NPVc. IRR%

DetailsYear 0Year 1Year 2Year 3Year 4 Initial Investment(533,800) Cash flows…

Answered: Problem 9-18 NPV and Discount Rates…

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 15 Company 15 is considering undertaking a new project. The financial controller has computed Net Present Value (NPV) of the project at two different discount rates. The NPV at a discount rate of 12% is £4,700 positive and at a discount rate of 20%, it is £7,400 negative. You are required to compute the Internal Rate of Return (IRR) using linear interpolation or extrapolation. The Internal Rate of Return of this project is which of the following: A 23.1% B 16.9% C 15.1% D 8.9%
5. Calculating Discounted Payback [LO3] An investment project costs $17,000 and has annual cash flows of $4,700 for six years. What is the discounted payback period if the discount rate is zero percent? What if the discount rate is 5 percent? If it is 19 percent? 306
QS 11-17 (Algo) Net present value of annuity and salvage value LO P3 Pablo Company is considering buying a machine that will yield income of $3,100 and net cash flow of $14,700 per year for three years. The machine costs $45,900 and has an estimated $11,100 salvage value. Pablo requires a 10% return on its investments. Compute the net present value of this investment. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided. Negative amounts should be indicated by a minus sign. Round your present value factor to 4 decimals.) Years 1-3 Year 3 salvage Totals [Initial investment Net present value Net Cash Flows X PV Factor 14,700 x 11,100 x $ S = = Present Value of Net Cash Flows $ 0 0
8-16 Three mutually exclusive alternatives are being A considered. Initial investment Annual net income Rate of return A B $43,000 $24,000 4,150 2,500 7.3% 8.3% с $17,000 1,700 6.0% Each alternative has a 20-year useful life with no salvage value. (a) Construct a choice table for interest rates from 0% to 100%. (b) If the minimum attractive rate of return is 7%, which alternative should be selected?
Problem 11-13 Operating Cash Flow and Leverage [LO4] A proposed project has fixed costs of $86,000 per year. The operating cash flow at 8,200 units is $93,800. Ignore the effect of taxes. a. What is the degree of operating leverage? (Do not round intermediate calculations and round your answer to 4 decimal places, e.g., 32.1616.) b. If units sold rise from 8,200 to 8,700, what will be the new operating cash flow? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. If units sold rise from 8,200 to 8,700, what is the new degree of operating leverage? (Do not round intermediate calculations and round your answer to 4 decimal places, e.g., 32.1616.) a. DOL b. New OCF c. New DOL
a
Dinesh bhai
Problem 10-9 Calculating Project OCF [LO1] Esfandairi Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2.3 million. The fixed asset will be depreciated straight- line to zero over its three-year tax life, after which time it will be worthless. The project is estimated to generate $1,654,000 in annual sales, with costs of $631,000. If the tax rate is 24 percent, what is the OCF for this project? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to the nearest whole number, e.g., 1,234,567.) OCF $ 917,897
None
5.
4 points Internal Rate of Return [LO 11-1, 11-2, 11-3, 11-4] Balloons By Sunset (BBS) is considering the purchase of two new hot air balloons so that it can expand its desert sunset tours. Various information about the proposed investment follows: (Future Value of $1, Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1.) Note: Use appropriate factor(s) from the tables provided. Initial investment (for two hot air balloons) Useful life eBook Salvage value BBS's cost of capital Annual net income generated References Assume straight line depreciation method is used. $ 464,000 8 years $ 48,000 $ 35,728 8% Required: Help BBS evaluate this project by calculating each of the following: 1. Accounting rate of return. Note: Round your answer to 2 decimal places. 2. Payback period. Note: Round your answer to 2 decimal places. 3. Net present value (NPV). Note: Do not round intermediate calculations. Negative amount should be indicated by a minus sign. Round the final…
Year 2 3 4 O 1 O $4.404.83 O $4.162.90 O $3.811.27 O $4.280.07 O $3,622.02 Assuming that the relevant cost of capital for both projects is 10%, you should be able to determine the net present value (NPV) and the internal rate of return (IRR) for both project. Assume now that the firm has capital rationing, but knows that its true reinvestment rate is 21%, while its cost of capital is 10 percent. Given this information, determine the modified net present value (MNPV) for Project A. Project A Cash Flow $10,000 00 $3.000.00 $ 4.000.00 $5,000.00 $3,000.00 Project B Cash Flow $11,000.00 $5.000.00 $4,000.00 $4,000.00 $3,000.00

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