Replacing old equipment at an immediate cost of $80,000 and an additional outlay of $10,000 three years from now will result in savings of $21,000 per year for 6 years The required rate of return is 12% compounded annually. Compute the net present value and determine if the investment should be accepted or rejected according to the net present value criterion.

Replacing old equipment at an immediate cost of $80,000 and an additional outlay of $10,000 three years from now will result in savings of $21,000 per year for 6 years The required rate of return is 12% compounded annually. Compute the net present value and determine if the investment should be accepted or rejected according to the net present value criterion.

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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(Net present value calculation) Big Steve's, makers of swizzle sticks, is considering the purchase of a new plastic stamping machine. This investment requires an initial outlay of $105,000 and will generate net cash inflows of $21,000 per year for 8 years. a. What is the project's NPV using a discount rate of 8 percent? Should the project be accepted? Why or why not? b. What is the project's NPV using a discount rate of 16 percent? Should the project be accepted? Why or why not? c. What is this project's internal rate of return? Should the project be accepted? Why or why not? a. If the discount rate is 8 percent, then the project's NPV is $ (Round to the nearest dollar.)
The construction of a bypass road needs a capital investment of $200,000 and $10,000 would be required each year for maintenance. The annual benefits to the project have been estimated to be $60,000. The study period(estimated life) of the project is 10 years. The MARR is set at 12%. a. What is the discounted payback period(in years)? b. Determine whether this is a good investment using Modified Benefit-Cost Ratio method with Present Worth(PW). c. Using Conventional Benefit-Cost Ratio method with PW but the MARR is set at 12%, is this project acceptable?
11) What is the rate of return (IRR) of a project that will generate revenues of $40,000 at the end of every year for 8 years, given the project will require an initial cash outlay today of $90,000 and another cash outlay of $80,000 in 6 years from today?
Replacing old equipment at an immediate cost of $70,000 and an additional outlay of $20,000 three years from now will result in savings of $16,000 per year for 8 years. The required rate of return is 10% compounded annually. Compute the net present value and determine if the investment should be accepted or rejected according to the net present value criterion.
Calculating the IRR for Project Long Project Long is expected to provide five years of cash inflows and to require an initial investment of $100,000. The required rate of return or discount rate that is appropriate for valuing the cash flows of Project Long is 17 percent What is Project Long's IRR, and is it a good investment opportunity?
You are responsible to manage an IS project with a 4-year horizon. The annal cost of the project is estimated at $40,000 per year, and a one-time costs of $120,000. The annual monetary benefit of the project is estimated at $96,000 per year with a discount rate of 6 percent. a. Calculate the overall return on investment (ROI) of the project. b. Perform a break-even analysis (BEA). At what year does break-even occur?
Assuming monetary benefits of a construction project at $50,000 per year, one-time costs (initial investment) of $15,000, recurring costs of $35,000 per year, a discount rate of 10 per cent, and a 4-year time horizon, calculate the net present value (NPV) of an information system's costs and benefits. Calculate the overall return on investment (ROI) of the project. During which year does break-even occur? Use the NPV template provided (modify to suit your answer) and clearly display the NPV, ROI, and year in which payback occurs. Write a paragraph explaining whether you would recommend investing in this project based on your ﬁnancial analysis. Explain your answer referring to the NPV, ROI and payback for this project. Discount Rate (10%) Year 0 - 1.0000 Year 1 - .9091 Year 2 - .8264 Year 3 - .7513 Year 4 - .6830
Investment Criteria. What is the NPV of a project that costs $250,000 and provides cash inflows of $50,000 annually for ten years and the discount rate is 10 percent? Should the project be accepted? Please show your work
2a. Explain the concept of Net Present Value and Discount rates. Gentry Limited is deciding whether to undertake a project which longs for three years. The expected total project cost is 15,000,000 ZMW today and the expected income after three years will be $25,000,000 ZMW. Use a discount rate of 10% to advise Gentry Limited director if this is a good investment or not. Give reasons for your answer.
(Net present value calculation) Big Steve's, makers of swizzle sticks, is considering the purchase of a new plastic stamping machine. This investment requires an initial outlay of $90,000 and will generate net cash inflows of $20,000 per year for 11 years. a. What is the project's NPV using a discount rate of 9 percent? Should the project be accepted? Why or why not? b. What is the project's NPV using a discount rate of 14 percent? Should the project be accepted? Why or why not? c. What is this project's internal rate of return? Should the project be accepted? Why or why not? a. If the discount rate is 9 percent, then the project's NPV is $. (Round to the nearest dollar.)
ThreeRivers Corp. is considering the purchase of a new piece of equipment with a life of 12 years. The internal rate of return of the project is 20%. ThreeRivers has a required rate of return (hurdle rate) of 17%. The project would have: Multiple Choice a net present value greater than zero. a payback period more than 12 years. a net present value of zero. an accounting rate of return greater than 17%.
Vijay

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