Question 7. You have been asked to give your professionalopinion about which of the two projects below, should bepursued. Which project is the better option? The discount rateis 7%, for both projects. Each project lasts five years. The initialinvestment and cash flows for the two projects are:Project A.Initial investment: $15 million. Cash Flow Year 1: $3 million. Cash Flow Year 2: $3 million. Cash Flow Year 3: $5 million. Cash Flow Year 4: $5 million. Cash Flow Year 5: $5 millionProject B• Initial investment: $20 million. Cash Flow Year 1: $2 million. Cash Flow Year 2: $4 million.C. Copy.(Look UpTranslate>

To determine which project is the better option, we need to calculate the Net Present Value (NPV) of…

Answered: Question 7. You have been asked to give…

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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Compute the payback statistic for Project A if the appropriate cost of capital is 7 percent and the maximum allowable payback period is four years. (Round your answer to 2 decimal places.) Project A Time: 0 1 2 3 4 5 Cash flow: −$1,100 $390 $510 $540 $320 $120 Should the project be accepted or rejected?multiple choice accepted rejected
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An investment project provides cash inflows of $740 per year for 9 years. What is the project payback period if the initial cost is $1,480? A. 2.00 years B. 2.02 years C. 1.90 years D. 1.94 years E. 2.04 years What is the project payback period if the initial cost is $4,958? A. 6.70 years B. 6.77 years C. 6.37 years D. 6.83 years E. 6.50 years What is the project payback period if the initial cost is $7,400? A. 3.01 years B. Never C. 4.95 years D. 5.25 years E. 1.35 years
An investment project that gives cash flow for the first year $ 10,000 and the second $ 15,000; The interest rate is 8.5%; The present value of the investment is equal to (to the nearest decimal place): Select one: a. $ 25,000 b. $ 21929 c. $ 30,000 d. $ 20,000
Compute the payback statistic for Project A if the appropriate cost of capital is 9 percent and the maximum allowable payback period is four years. (Round your answer to 2 decimal places.) Project A Time: 0 1 2 3 4 5 Cash flow: −$2,100 $790 $810 $740 $520 $320 Payback: ? Years
c. A company is planning to invest in a project over a 5-year period, but wants to know its financial implications. It expects the cash in-flow return on the investment to steadily increase over the 5 years. Using the information below, help determine the Total Net Cash Flows, the Net Present Value and the estimated Payback Period. Note: Estimate the payback period to the nearest year. Discount Rate 12% Investment Project Initial Investment Year 1 Year 2 Year 3 Year 4 Year 5 Cash Flow $ $ $ $ $ $ Total Net Cash Flow (5,000) 800 ? 900 ? 1,500 ? 1,800 ? 3,200 NPV of investment Estimated Payback Period
Subject:
(IRR calculation) Determine the IRR on the following projects: a. An initial outlay of $13,000 resulting in a single free cash flow of $17,207 after 7 years b. An initial outlay of $13,000 resulting in a single free cash flow of $47,031 after 14 years c. An initial outlay of $13,000 resulting in a single free cash flow of $110,851 after 23 years d. An initial outlay of $13,000 resulting in a single free cash flow of $13,624 after 4 years a. What is the IRR of a project with an initial outlay of $13,000 resulting in a single free cash flow of $17,207 after 7 years? % (Round to two decimal places.)
Simple Investment Allocation Case: This year, 2022 ABM Company selected your team to manage their allotted budget amounting to 10 million pesos for investment diversification portfolio. Your team was assigned to handle the said account. Question: How would you allocate funds?
A project has estimated annual net cash flows of $63,700. It is estimated to cost $687,960. Determine the cash payback period. Round your answer to one decimal place.
Information on four investment proposals is given below: 6 years A B Investment required Present value of cash inflows Net present value $ (300,000) 424,800 $ 124,800 $ (140,000) 191,700 $ 51,700 Investment Proposal C $ (100,000) 151,100 $ 51,100 Life of the project 5 years 7 years Required: 1. Compute the profitability index for each investment proposal. Note: Round your answers to 2 decimal places. 2. Rank the proposals in terms of preference. Investment Profitability Proposal Index Rank Preference ABCD D $ (1,500,000) 2,001,700 $ 501,700 6 years
An investment project has annual cash inflows of $6,300, $7,400, $8,200 for the next four years, respectively, and $9,500, and a discount rate of 19 percent. What is the discounted payback period for these cash flows if the initial cost is $9,500? Multiple Choice O O O O O 1.80 years 2.55 years 1.30 years 3.60 years 0.80 years

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