QUESTION 1Solarcity Ltd, a company specialising in the creation of electricity using renewable energy islooking to the establishment of a new facility in order to take advantage of the new energy planauthorised by the government. A report is to be presented to the shareholders at the next AGM(annual general meeting).YEAR1234567CASH FLOWSR(18 500 000)R12 000 000 increase from Year 1R5 500 000Increase of 25% from year 3R10 500 000REQUIRED:Using the financial tables only.Increase of 15% from year 5Decrease of 10% from year 5Solarcity Ltd's opportunity cost is 16% per annum.Q.1.2 Calculate the future value of the cash flows of Solarcity Ltd, assuming the cashflows will occur at the beginning of each year.

In this question , Solarcity ltd. a company is specializing in creation of renewable energy is…

Answered: QUESTION 1 Solarcity Ltd, a company…

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

See similar textbooks

Similar questions

QUESTION 4 J'adore Corporation is in the process of deciding to purchase new equipment. The cost of capital is 10 percent and expected cash flows for each equipment are given as follows: a) b) Year 0 1 2 3 Calculate the following: c) d) 4 5 Equipment AAA (RM) 10,000 7,000 3,500 3,000 1,500 2,500 Payback period for the two projects. Net present value for the two projects. Internal rate of return for Project BBB only. Which project would be selected? State your reason. Equipment BBB (RM) 10,000 4,000 4,000 4,000 4,000 4,000
K aces You need to estimate the value of Laputa Aviation. You have the following forecasts (in millions of dollars) of its profits and of its future investments in new plant and working capital: Earnings before interest, taxes, depreciation, and amortization (EBITDA) Depreciation Pretax profit Tax at 30% Investment a. Total value b. Laputa's equity $77 27 50 15 15 S S Year 627 313 2 $ 97 37 60 18 18 3 $ 112 42 70 21 21 From year 5 onward, EBITDA, depreciation, and investment are expected to remain unchanged at year-4 levels. Laputa is financed 50% by equity and 50% by debt. Its cost of equity is 14%, its debt yields 10%, and it pays corporate tax at 30%. 4 $ 117 47 a. Estimate the company's total value. Note: Do not round intermediate calculations. Enter your answer in millions rounded to the nearest whole amount. b. What is the value of Laputa's equity? Note: Do not round intermediate calculations. Enter your answer in millions rounded to the nearest whole amount. 70 21 23
Assignment 3 Ch.5 Name / ID/ Section / Q1/ Ipswich Corporation is investment opportunity with the expected net cash inflows of $300,000 for four years. The residual value of the investment, at the end of four years, would be $70,000. The company uses a discount rate of 14%, and the initial investment is $290,000. Calculate the NPV of the investment. considering an Present value of an ordinary annuity of $1: 12% 13% 14% 15% 0.893 0.885 0.877 0.87 1.69 1.668 1.647 1.626 2.402 2.361 .322 2.283 3.037 2.974 2.914 2.855 Present value of $1: 12% 13% 14% 15% 0.893 0.885 0.877 0.87 Q2/ A company is evaluating an investment. The company uses the straight-line method of depreciation. Use the following information to compute the accounting rate of return. Show your calculations and round to one decimal place. Project SR875,000 Investment Residual value Operating income Year I 120,000 Year 2 120,000 Year 3 120,000 Year 4 120,000 Year S Q3/ Your grandfather would like to share some of his fortune…
Clearcast Communications Inc. is considering allocating a limited amount of capital investment funds among four proposals. The amount of proposed investment, estimated operating income, and net cash flow for each proposal are as follows: Operating Income Net Cash Flow Investment Year Proposal A: $450,000 $ 30,000 1 $120,000 2 30,000 120,000 3 20,000 110,000 4 10,000 100,000 (30,000) $ 60,000 $ 60,000 40,000 60,000 $510,000 $100,000 Proposal B: $200,000 1 80,000 3 20,000 60,000 4 (10,000) 30,000 (20.000) $ 90,000 20.000 $290,000 (Continued)
QUESTION 3 A company has the project cashflow presented in the table below. If the inflation-free interest rate is 12% per year and the inflation rate is 4% per year, determine the Present Worth of the company's cashflow. Cashflow Item Amount First Cost -18,000 Annual Operating Cost Salvage Value No. of Years -7500 5000 10
Question 3 A company has $20 million available to invest in new projects. There are three independent projects that it is considering. The after-tax cash flows of the projects are as follows: Project ABC Year 0 cash flow (20 million) (10 million) (10 million) Year 1 cash flow 20 million 8 million 6 million Year 2 cash flow 10 million 7 million 10 million Calculate the IRR, PI and NPV of each of the two-year projects and recommend which project(s) the company should invest in (and why). The company's cost of capital is 12%.
QUESTION 4 Determine FIVE (5) reasons why payback period method cannot be recommended as the main method used by a company to assess potential investment projects. а. In an effort to expand its activities in the local market, Paradigm Engineering Sdn. Bhd. is considering two mutually exclusive projects, one with a four-year life and the other with a six-year life. Both projects require an initial outlay of RM140,000. The annual after-tax cash flows of the projects are as follows: b. Year Project Rain (RM) Project Kain (RM) 50,000 50,000 50,000 50,000 40,000 40,000 40,000 40,000 40,000 40,000 1 2 3 4 6. Assume that the policy of the company is to demand a required rate of return of 10% on any investment in the project. Required: Compute the following capital budgeting measures for both projects: i. Payback Period. ii. Net Present Value. iii. Internal Rate of Return. iv. Based on the information derived from the above calculations (i, ii and ii), evaluate which of the two projects the…
Question 1 Option 1: If a company makes an investment of $1,000,000 in new equipment which is expected to generate $250,000 in revenue per year, the payback period is? Option 2: If they have another option to invest $1,000,000 into equipment which they expect to generate $280,000 in revenue per year, the payback period is? Which option is better for the company? Question 2 It will cost $3,700 to acquire a small ice cream cart. Cart sales are expected to be $2,900 a year for four years. After four years, the cart is expected to be worthless as that is the expected remaining life of the cooling system. What is the payback period of the ice cream cart?
Current Attempt in Progress Sunland Company is considering an investment that will return a lump sum of $900,000, 6 years from now. Click here to view the factor table 1. Table 2 Table 3 Table 4 What amount should Sunland Company pay for this investment to earn an 12% return? (For calculation purposes, use 5 decimal places as displayed in the factor table provided, e.g. 5.24571. Round answer to 2 decimal places, e.g. 25.25.) Sunland Company should pay $Current Attempt in Progress Lamb Company deposited $15,000 annually for 6 years in an account paying 5% interest compounded annually. Click here to view the factor table 1. Table 2 Table 3 Table 4 What is the balance of the account at the end of the 6th year? (Round answers to 2 decimal places, e.g 2552.75.) Amount $
Question 1 You currently work at Happy home Construction company The government offered the company 4 projects to undertake in building houses Management is trying to select the best investment from among these alternative independent projects. Each alternative involves an initial outlay of $160,000 and a 10% cost of capital. Management requires that all project investments should be recovered in 4 years. Their cash flows are as follows: Year Kinstown St Christina St Thomp St Bess 1 60,000 40,000 41,000 0 2 50,000 60,000 41,000 60,000 3 40,000 0 41,000 0 4 30,000 40,000 41,000 56,000 5 20,000 20,000 41,000 50,000 6 8,000 60,000 0 80,000 1a. Calculate each project’s Payback Period. 1b. Based on the payback periods, which project(s) should they accept if the project(s) are independent. 1c. Which project(s) should they accept if the projects are mutually exclusive? PLEASE DO QUESTION 1…
Problems 1. The capital investment committee of Taiwan Semiconductor Company is considering two capital investments. The estimated income from operations and net cash flows from each investment are as follows: 123 45 Year Total Lithography Machine Income from Operations $26,000 21,000 7,000 4,000 Problem 1 Instructions 1,450 $59,450 Net Cash Flow a. Compute the following: i. ii. $41,000 35,000 22,500 18,000 16,150 $132,650 Photoresist Machine Income from Operations $12,250 12,250 12,250 12,250 12,250 $61,250 Net Cash Flows Each project requires an investment of $75,000. Straight-line depreciation will be used, and no residual value is expected. The committee has selected a rate of 12% for purposes of the net present value analysis. $25,250 25,250 25,250 25,250 25,250 $126,250 The average rate of return for each investment. The net present value for each investment. Use the present value of $1 table appearing in this chapter (Exhibit 2). (Round present values to the nearest dollar.) b.…
Question 1 (at home, to practice) You have been asked by Transport for London Ltd. to design a new and more efficient component for the signaling system of the London Underground. The engineers and other experts you consulted have come up with four possible projects for its production. All costs and revenues for the two possibilities are represented by the patterns of after-tax cash flows as follow (assume no uncertainty): Projects Initial investment Cash flow Cash flow Cash flow Cash flow Cash flow Year A. B. 012345 A Air wir Nó -9 2 2.5 3.5 4 B 9453 -9 3.5 2.5 C -9 ن من من من من 3 3 3 D -9 0.7 0.7 0.7 0.7 forever For all projects, the appropriate cost of capital is 6%. Calculate the Net Present Value for each project using the most appropriate formulae. [Practice using Excel for your calculations, although of course for the exam you will not have Excel!]. Which project would you choose and why? Project D seems the best project because it generates positive cash flows forever. Do your…

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS