Project A has a net present value of zero when the discount factor of 20% is used. How much return is the project earning? If project A above is earning K150, 000 per year in perpetuity, what is the initial investment cost of the project? Company A expects to generate K150, 000 cash flows per year in perpetuity and the risk adjusted discount rate is 20%. What should be the certainty equivalent cash flows when the risk free rate is 10%

Project A has a net present value of zero when the discount factor of 20% is used. How much return is the project earning? If project A above is earning K150, 000 per year in perpetuity, what is the initial investment cost of the project? Company A expects to generate K150, 000 cash flows per year in perpetuity and the risk adjusted discount rate is 20%. What should be the certainty equivalent cash flows when the risk free rate is 10%

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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2. Assume that we can estimate a project's cash flows as follows: n 0 1 2 3 4 5 Expected Flow E(An) Estimate of Standard Deviation on $0 $10 $15 $20 $25 $30 -$300 $120 $150 $150 $110 $100 In this case, each annual flow can be represented by a random variable with known mean and variance. Further assume complete independence among the cash flows. (a) Find the expected NPW and the variance of this project at i = 10%. (b) If all cash flows are normally distributed with the given means and variances, what is the probability that the NPW will exceed $200?
The common stock of Eddie's Engines, Inc. sells for $15.75 a share. The stock is expected to pay $075 per share next month when the annual dividend is distributed. Eddie's has established a pattern of increasing its dividends by 49% annually and expects to continue doing so. What is the market rate of return on this stock?
(c) If A and B are mutually exclusive projects, which project would you select based on the rate of return on incremental investment at MARR = 10%? The rate of return on the incremental investment is %. (Round to one decimal place.) Which project would you select based on the rate of return on incremental investment at MARR = 10%? Choose the correct answer below. Project A O Project B 1: More Info FOT23 n 0 1 Net Cash Flow Project A - $145,000 35,000 35,000 140,000 Project B - $130,000 25,000 25,000 150,000
Please write the attached text in handwriting with the writing (masa tarabeh) at the beginning of the page
DRAW CASH FLOW DIAGRAM Calculate the capitalized cost of a project that has an initial cost of P8,000,000 and an additional cost of P250,000 at the end of every 8 years. The annual operating costs will be P150,000 at the end of every year for the first 5 years and P200,000 thereafter. In addition there is expected to be recurring major rework cost of P500,000 every 13 years. Assume i=12%
Based on past experience, a chemicals firm estimates that the cost of new capacity additions obeys the lawf(y) =.0205y58where y is measured in tons per year and f(y) in millions of dollars. Demand isgrowing at the rate of 3,000 tons per year, and the accounting department recommends a rate of 12 percent per year for discounting future costs.a. Determine the optimal timing of plant additions and the optimal size of eachaddition.b. What is the cost of each addition?c. What is the present value of the cost of the next four additions? Assume anaddition has just been made for the purposes of your calculation. (Refer toAppendix 1–A for a discussion of cost discounting.)
Batelco Inc. is considering two mutually exclusive projects A and B. Each project requires an initial investment as presented in the below table. The economic life of the project A will be 6-Year's and Project B will be 5 years, and both projects carry same risk, Batelco Inc uses a discount rate of 12%. After considering the current economic situation Batelco Inc. has set a maximum payback period of 4 years and minimum return on investment (ROI) 18%. A financial analyst, prepared estimates of the annual revenues and costs associated with each project as in the below table: Cost of equipment Working Capital needed Overhaul of the equipment in two years Annual revenues and costs: Sales revenues Variable expenses Depreciation expense Fixed out-of-pocket operating costs Life of Project Projects A 240.000 60,000 12000 375,000 180.000 60.000 90,000 6 year Projects B 470.000 80,000 14000 300,000 90,000 74,000 70,000 5 years The working capital will be released 6th and 5th year of the project…
a. A project costs $10 up front and has net benefits of $15 with probability 0.8 at the end of the second year and otherwise returns nothing. The discount rate is 0.035. What is the NPV? b. At what probability of returning $15 after year 2 would the ENPV be 0?
Swiss franc 1-year forward rate $1.17 !! Swiss franc spot rate now $1.09 %3D Also assume that a U.S. exporter denominates its Swiss exports in Swiss francs and expects to receive SF500,000 in 1 year. Using the information above, what will be the approximate value of these exports in 1 year in U.S. dollars given that the firm executes a forward hedge? O$545,000 O$438,596 $585,000 O $570,000
Company A expects to generate K150, 000 cash flows per year in perpetuity and the risk adjusted discount rate is 20%. What should be the certainty equivalent cash flows when the risk free rate is 10%
Which of the following interpretations would be best for the scenario analysis results shown below? Worst- case PW (18%) -$650,000 IRR 2.10% Most- likely case Best-case $58,000 $2,660,000 33% 14.60% a. Since the most-likely case has a PW <0, the project should be abandoned immediately b. Since the worst-case has a negative present worth, this project must be rejected. c. Since the average of the three cases is a positive present worth, the project is acceptable. d. Because only one of the scenarios shows the project as profitable, the project should be considered very risky, and, if accepted, should be subject to greater scrutiny in its planning and forecasting.
A project has an initial cost of $65,000, expected net cash inflows of $11,000 per year for 12 years, and a cost of capital of 11%. What is the project's MIRR? (Hint: Begin by constructing a time line.) Do not round intermediate calculations. Round your answer to two decimal places.