QUESTION 1 XYZ is evaluating a project that would require an initial investment of $72,300.00 today. The project is expected to produce annual cash flows of $8,400.00 each year forever with the first annual cash flow expected in 1 year. The NPV of the project is $7,500.00. What is the IRR of the project? 11.62% (plus or minus 0.02 percentage points) 10.53% (plus or minus 0.02 percentage points) 10.37% (plus or minus 0.02 percentage points) 12.96% (plus or minus 0.02 percentage points) None of the above is within 0.02 percentage points of the correct answer

QUESTION 1 XYZ is evaluating a project that would require an initial investment of $72,300.00 today. The project is expected to produce annual cash flows of $8,400.00 each year forever with the first annual cash flow expected in 1 year. The NPV of the project is $7,500.00. What is the IRR of the project? 11.62% (plus or minus 0.02 percentage points) 10.53% (plus or minus 0.02 percentage points) 10.37% (plus or minus 0.02 percentage points) 12.96% (plus or minus 0.02 percentage points) None of the above is within 0.02 percentage points of the correct answer

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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Suppose your firm is considering investing in a project with the cash flows shown below, that the required rate of return on projects of this risk class is 9 percent, and that the maximum allowable payback and discounted payback statistics for the project are 35 and 45 years, respectively. Time: Cash flow: 2 4 -$5,100 $1,280 $2,48e $1, 680 $1,680 $1,489 $1, 250 Use the NPV decision rule to evaluate this project. (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your final answer to 2 decimal places.) NPV
NPV and IRR Benson Designs has prepared the following estimates for a long-term project it is considering. The initial investment is $37,770, and the project will yield cash inflows of $5,000 per year for 12 years. The firm has a cost of capital of 15%. a. Determine the net present value (NPV) for the project. b. Determine the internal rate of return (IRR) for the project. c. Would you recommend that the firm accept or reject the project? a. The NPV of the project is $ (Round to the nearest cent)
Question It is expected that a 2-year term project will generate revenues of $5 million at the end of the second year. Costs and expenses are fixed at $3 million at thc end of the first year. You are also given that the risk-free rate is 3% and the market risk premium is 5.5%. Determine the project's beta if the revenues have a beta of 1.15. Possible Answers A Less than I At least 1 but less than 2 C At least 2 but less than 3 D At least 3 but less than 4 At least 4
IRR A project has an initial cost of $45,000, expected net cash inflows of $10,000 per year for 8 years, and a cost of capital of 10%. What is the project's IRR? Round your answer to two decimal places. %
Imagine a project with the initial investment of $35,000. The project is expected to last 10 years, with the discount rate of 8.80% and the annual (cash flow) growth rate of 1.20%. If the first year CF is $8,850, what is the NPV of this project? $27,000 $25,000 $26,000 $27,500 $26,500
1. What is the profitability index of a project that costs $90,000 and returns $30,000 annually for 8 years if the opportunity cost of capital is 9.6%? a.0.64 b.0.80 c.1.76 d.1.05 e.1.26 2. King Corporation is planning a 15-year project with an initial investment of $2,013,000. The project will have $563,000 cash inflows per year in years 1-2; $166,000 cash inflows in years 3-10, and $57,000 cash inflows in years 11-15. Determine the project's internal rate of return (IRR). Using financial calculator a.6.87% b.5.72% c.4.58% d.10.30% e.8.24%
A new project will have an intial cost of $14,000. Cash flows from the project are expected to be $-4,000, $6,000, $8,000, and $12,000 over the next 4 years, respectively. Assuming a discount rate of 12%, what is the project's IRR? Question 5 options: 12.61% 13.14% 13.66% 13.93% 13.40%
Spacevoyage Inc. is considering the installation of a new experimental laboratory which requires a key equipment costing $5,000,000. It is expected that the equipment will generate important experimental material worth $2,000,000 for each of the next 5 years. In the 6th year, the equipment will need an upgrade costing $2,500,000. Required return for this project is 15%. a) Which capital budgeting method between NPV and IRR will be most suitable for arriving at a decision on whether or not to get the equipment installed? Briefly explain your reasons. b) Should the new equipment be installed? Support your answer with relevant computation.
A new project will have an intial cost of $12,000. Cash flows from the project are expected to be $6,000, $5,000, and $4,000 over the next 3 years, respectively. Assuming a discount rate of 12%, what is the project's IRR? Question 3 options: 13.51% 12.99% 14.03% 13.25% 13.77%
MIRR A project has an initial cost of $60,000, expected net cash inflows of $15,000 per year for 7 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.
Project Alpha requires an initial outlay of $500,000 and has a profitability index of 1.5. The project is expected to generate equal annual cash flows over the next twelve years. The required return for this project is 18%. What is project Alpha’s net present value? Round to the nearest 1,000. $165,000 $170,000 $185,000 $200,000
MIRR A project has an initial cost of $70,000, expected net cash inflows of $13,000 per year for 11 years, and a cost of capital of 10%. 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. %

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