Sarasota Compacts will generate cash flows of $29,200 in year 1, and $66,200 in year 2. However, if it makes an immediate investmentof $19,100, it can instead expect to have cash streams of $54,600 in total in year 1 and $61,700 in year 2. The appropriate discountrate is 9 percent.Calculate the NPV of the proposed project. (Enter negative amount using either a negative sign preceding the number e.g. -45 orparentheses e.g. (45). Round answer to 2 decimal places, e.g. 25.25.)+ANPV $

Step-by-Step NPV CalculationThe NPV formula is: NPV=∑t=1n(CF_t/(1+r)^t−I0 Where:CF_t = Cash flow in…

Answered: Sarasota Compacts will generate cash…

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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please answer both questions correctly: 10. A project has the following cash flows: Year Cash Flow 0 $ 43,500 1 −22,500 2 −33,500 a. What is the IRR for this project? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. What is the NPV of this project, if the required return is 12 percent? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. What is the NPV of the project if the required return is 0 percent? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) d. What is the NPV of the project if the required return is 24 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) 11. Anderson International Limited is…
Which of the following describes the NPV decision rule? Accept if the cost of the project is recouped within 3 years. Accept if the PV of the cash inflows of the project divided by the absolute value of the cost of the project is greater than one. Accept if the PV of the cash inflows from the project minus the cost of the project is greater than zero Accept if the average net income from the project divided by the average book value is greater than the target required Accept if the rate of return earned on the project is greater than the required return for the project.
Union pacific is considering a project that has the following cash flow and WACC data. What is the projects MIRR? Note that a projects MIRR can be less than the WACC (and negative), in which case be rejected. WACC: 9.50% Year 0 1 2 3 Cash flows -1,000, 450, 450, 450
A company is considering three alternative investment projects with different net cash flows. The present value of net cash flows is calculated using Excel and the results follow. Potential Projects Present value of net cash flows (excluding initial investment) Initial investment Project A $ 11,226 (10,000) Project B $ 10,568 (10,000) a. Compute the net present value of each project. b. If the company accepts all positive net present value projects, which of these will it accept? c. If the company can choose only one project, which will it choose on the basis of net present value? Complete this question by entering your answers in the tabs below. Required A Required B Required C Compute the net present value of each project. Potential Projects Project A Project B Project C Present value of net cash flows Initial investment Net present value $ $ $
The management of NUBD Co. is considering three investment projects-W, X, and Y. Project W would require an investment of P21,000, Project X of P66,000, and Project Y of P95,000. The present value of the cash inflows would be P22,470 for Project W, P73,920 for Project X, and P98,800 for Project Y. Rank the projects according to the profitability index, from most profitable to least profitable. *
Consider the cash flows for projects Alpha and Beta as follows: Project Alpha Beta Required: (a) (b) Year 0 cash flow -$250 - $150 Year 1 cash flow 0 Year 2 cash flow 400 200 0 Determine the discount rate that will make the NPV of the two projects equal. (Ignore negative discount rates.) Determine the range of discount rates in which project Alpha is preferred to project Beta.
(Related to Checkpoint 11.1 and Checkpoint 11.4) (IRR and NPV calculation) The cash flows for three independent projects are found below: a. Calculate the IRR for each of the projects. b. If the discount rate for all three projects is 13 percent, which project or projects would you want to undertake? c. What is the net present value of each of the projects where the appropriate discount rate is 13 percent? a. The IRR of Project A is%. (Round to two decimal places.) Data table Year 0 (Initial investment) Year 1 Year 2 Year 3 Year 4 Year 5 Project A $(70,000) $12,000 18,000 19,000 28,000 33,000 Project B $(110,000) $28,000 28,000 28,000 28,000 28,000 Project C $(420,000) $240,000 240,000 240,000
Assume an investment has cash flows of -$25,200, $7,000, $8,000, $8,500, and $9,000 for Years 0 to 4, respectively. What is the NPV if the required return is 11.1 percent? decimal places, e.g., -32.16.) Should the project be accepted or rejected? (do not round intermediate calculations, enter negative number with a minus sign and round your answer to 2 (write either "accepted" or "rejected")
The Michner Corporation is trying to choose between the following two mutually exclusive design projects: Year Cash Flow (1) Cash Flow (II) -$ -$ 0 55,000 1 25,000 2 25,000 3 25,000 a-1. If the required return is 10 percent, what is the profitability index for both projects? (Do not round intermediate calculations and round your answers to 3 decimal places, e.g., 32.161.) Project I Project II 18,900 10,150 10,150 10,150 a- If the company applies the profitability index decision rule, which project should the 2. firm accept? Project I O Project II Project I Project II 1. b- What is the NPV for both projects? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
Let's assume that you are working on an independent capital budgeting project which is expected to have the following cash flows: Year Cash Flows 0 -$850,000 1 $300,000 2 $400,000 3 $500,000 What is the project’s net present value (NPV) at an 18% required rate of return? (Round to the nearest whole number.) Will you accept or reject this project?

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