Suppose your firm is considering investing in a project with the cash flows shown below, that the required rate of return on projects ofthis risk class is 7 percent, and that the maximum allowable payback and discounted payback statistics for the project are 3.5 and 4.5years, respectively.Time:1234Cash flow:-$5,000 $1,270 $2,470 $1,670$1,67056$1,470 $1,270Use the Pl decision rule to evaluate this project. (Do not round intermediate calculations and round your final answer to 2 decimalplaces.)PIShould it be accepted or rejected?O rejectedO accepted

PI is a profitability index and measures profitability. A higher PI, greater than 1 means the…

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 7 percent, and that the maximum allowable payback and discounted payback statistics for the project are 3.5 and 4.5 years, respectively. Time: Cash flow: 1 2 3 4 -$5,000 $1,270° $2,470 $1,670 $1,670 5 $1,470 6 $1,270 Use the Pl decision rule to evaluate this project. (Do not round intermediate calculations and round your final answer to 2 decimal places.) PI hould it be accepted or rejected? O rejected

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 7 percent, and that the maximum allowable payback and discounted payback statistics for the project are 3.5 and 4.5 years, respectively. Time: Cash flow: 1 2 3 4 -$5,000 $1,270° $2,470 $1,670 $1,670 5 $1,470 6 $1,270 Use the Pl decision rule to evaluate this project. (Do not round intermediate calculations and round your final answer to 2 decimal places.) PI hould it be accepted or rejected? O rejected

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 7 percent, and that the maximum allowable payback and discounted payback statistics for the project are 3.5 and 4.5 years, respectively. Time: Cash flow: 0 2 3 4 5 -$5,400 $1,600 $2,800 $2,000 $2,000 $1,800 Use the MIRR decision rule to evaluate this project. (Do not round intermediate calculations and round your final answer to 2 decimal places.) 6 $1,600
For the given cash flows, suppose the firm uses the NPV decision rule. Year Cash Flow 0-$ 150,000 1 66, 000 2 73,000 3 57,000 a. At a required return of 10 percent, what is the NPV of the project? b. At a required return of 20 percent, what is the NPV of the project?
Suppose your firm is considering two mutually exclusive, required projects with the cash flows shown below. The required rate of return on projects of both of their risk class is 8 percent, and that the maximum allowable payback and discounted payback statistic for the projects are 2 and 3 years, respectively. Time 1 2 3 Project A Cash Flow Project B Cash Flow -25,000 15,000 35,000 6,000 -35,000 15,000 25,000 55,000 Use the NPV decision rule to evaluate these projects; which one(s) should be accepted or rejected? Multiple Choice Accept A, reject B Accept neither A nor B Accept both A and B Reject A, accept B
Vijay shiyal
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 13 percent, and that the maximum allowable payback and discounted payback statistics for your company are 3 and 3.5 years, respectively. Time: 0 1 2 3 4 5 Cash flow: −$255,000 $61,800 $80,000 $133,000 $118,000 $77,200 Use the MIRR decision rule to evaluate this project. (Do not round intermediate calculations and round your final answer to 2 decimal places.) Should this be Accepted or Rejected
7
None
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 11 percent, and that the maximum allowable payback and discounted payback statistics for your company are 3 and 3.5 years, respectively. Time: Cash flow: 0 1 3 4 -$233,000 $65,600 $83,800 $140, 800 $121,800 MIRR Use the MIRR decision rule to evaluate this project. Note: Do not round intermediate calculations and round your final answer to 2 decimal places. 5 $81,000 %
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 10 percent and that the maximum allowable payback and discounted payback statistic for the project are 2 and 3 years, respectively. Time Cash Flow Multiple Choice $-24013, reject -1,000 Use the NPV decision rule to evaluate this project; should it be accepted or rejected? $835 86, accept $759 87, accept $1,835.86 accept 2 400 200 3 600 4 600 5 200 6 600
1. Suppose your firm is considering investing in a project with the cash flows shown as follows, that the required rate of return on projects of this risk class is 8 percent, and that the maximum allowable payback and discounted payback statistics for the project are 3.5 and 4.5 years, respectively. Use the IRR decision to evaluate this project; should it be accepted or rejected? Time 0 1 2 3 4 5 6 Cash Flow −$ 5,000 $ 1,200 $ 1,400 $ 1,600 $ 1,600 $ 1,100 $ 2,000 2. Bad Pizza Pies, Inc has earnings per share of $1.75 and P/E of 42.56. What is the stock price?
Compute the discounted payback statistic for Project y and recommend whether the firm should accept or reject the project with the cash flows shown as follows
Suppose you are evaluating a project with the expected future cash inflows shown in the following table. Your boss has asked you to calculate the project’s net present value (NPV). You don’t know the project’s initial cost, but you do know the project’s regular, or conventional, payback period is 2.50 years. Year Cash Flow Year 1 $375,000 Year 2 $450,000 Year 3 $475,000 Year 4 $425,000 If the project’s weighted average cost of capital (WACC) is 10%, the project’s NPV (rounded to the nearest dollar) is: $267,719 $312,338 $297,465 $282,592 Which of the following statements indicate a disadvantage of using the regular payback period (not the discounted payback period) for capital budgeting decisions? Check all that apply. The payback period does not take the time value of money into account. The payback period does not take the project’s entire life into account. The payback period is calculated using net income…

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