Project E has the following cash flows: (remember the year zero number is negative) Year 2 Year 3 Cash flows $400,000 $500,000 Year 0 -$1,000,000 Year 1 $300,000 Year 4 $500,000 6. Using a 9% cost of capital, what is the net present value of this project? Assume that Project E is mutually exclusive to Project B above. Using net present value to make the decision-- should this project be accepted over Project B? 7. Using a 9% cost of capital, what is the profitability index for this project? Assume that Project E is mutually exclusive to Project B above. Using the profitability decision model to make the decision-- should this project be accepted over Project B? 8. Using a 9% cost of capital, what is the internal rate of return for this project? Assume that Project E is mutually exclusive to Project B above. Using the internal rate of return decision model to make the decision should this project be accepted over Project B? - 9. Using a 9% cost of capital, what is the payback period for this project? Assume that Project E is mutually exclusive to Project B above. Using the payback decision model to make the decision should this project be accepted over Project B? 10. Using a 9% cost of capital, what is the present value payback period for this project? Assume that Project E is mutually exclusive to Project B above. Using the present value payback decision model to make the decision should this project be accepted over Project B? 11. Which project should be selected?
Project E has the following cash flows: (remember the year zero number is negative) Year 2 Year 3 Cash flows $400,000 $500,000 Year 0 -$1,000,000 Year 1 $300,000 Year 4 $500,000 6. Using a 9% cost of capital, what is the net present value of this project? Assume that Project E is mutually exclusive to Project B above. Using net present value to make the decision-- should this project be accepted over Project B? 7. Using a 9% cost of capital, what is the profitability index for this project? Assume that Project E is mutually exclusive to Project B above. Using the profitability decision model to make the decision-- should this project be accepted over Project B? 8. Using a 9% cost of capital, what is the internal rate of return for this project? Assume that Project E is mutually exclusive to Project B above. Using the internal rate of return decision model to make the decision should this project be accepted over Project B? - 9. Using a 9% cost of capital, what is the payback period for this project? Assume that Project E is mutually exclusive to Project B above. Using the payback decision model to make the decision should this project be accepted over Project B? 10. Using a 9% cost of capital, what is the present value payback period for this project? Assume that Project E is mutually exclusive to Project B above. Using the present value payback decision model to make the decision should this project be accepted over Project B? 11. Which project should be selected?
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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Cost of Debt, Cost of Preferred Stock
This article deals with the estimation of the value of capital and its components. we'll find out how to estimate the value of debt, the value of preferred shares , and therefore the cost of common shares . we will also determine the way to compute the load of every cost of the capital component then they're going to estimate the general cost of capital. The cost of capital refers to the return rate that an organization gives to its investors. If an organization doesn’t provide enough return, economic process will decrease the costs of their stock and bonds to revive the balance. A firm’s long-run and short-run financial decisions are linked to every other by the assistance of the firm’s cost of capital.
Cost of Common Stock
Common stock is a type of security/instrument issued to Equity shareholders of the Company. These are commonly known as equity shares in India. It is also called ‘Common equity
Question
Transcribed Image Text:Project E has the following cash flows: (remember the year zero number is negative)
Year 2
Year 3
Cash flows
$400,000
$500,000
Year 0
-$1,000,000
Year 1
$300,000
Year 4
$500,000
6. Using a 9% cost of capital, what is the net present value of this project? Assume that
Project E is mutually exclusive to Project B above. Using net present value to make
the decision-- should this project be accepted over Project B?
7. Using a 9% cost of capital, what is the profitability index for this project? Assume that
Project E is mutually exclusive to Project B above. Using the profitability decision
model to make the decision should this project be accepted over Project B?
8. Using a 9% cost of capital, what is the internal rate of return for this project? Assume
that Project E is mutually exclusive to Project B above. Using the internal rate of
return decision model to make the decision should this project be accepted over
Project B?
9. Using a 9% cost of capital, what is the payback period for this project? Assume that
Project E is mutually exclusive to Project B above. Using the payback decision model
to make the decision should this project be accepted over Project B?
10. Using a 9% cost of capital, what is the present value payback period for this project?
Assume that Project E is mutually exclusive to Project B above. Using the present
value payback decision model to make the decision should this project be accepted
over Project B?
11. Which project should be selected?
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