The cash flows associated with a project can be represented by the following decision tree (conditional probabilities are in parentheses): Year 0 Year 1 -$800 $400 (4) $500 (6) Year 2 $300 (.5) $500 (5) $400 (.5) $600 (.5) Year 3 $200 (.5) $400 (5) $400 (5) $600 (.5) $300 (5) $500 (5) $500 (5) $700 (5) Given this data, determine the expected NPV for this project if the appropriate cost of capital is 12.36 percent.

The cash flows associated with a project can be represented by the following decision tree (conditional probabilities are in parentheses): Year 0 Year 1 -$800 $400 (4) $500 (6) Year 2 $300 (.5) $500 (5) $400 (.5) $600 (.5) Year 3 $200 (.5) $400 (5) $400 (5) $600 (.5) $300 (5) $500 (5) $500 (5) $700 (5) Given this data, determine the expected NPV for this project if the appropriate cost of capital is 12.36 percent.

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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What is the process of consideration of the payback period?
In the estimation of incremental cash flows for a new project, several costs and issues are considered. In reference to the lecture materials for cash flow estimation, list the seven important issues to be kept track of in estimating incremental cash flows for expansion, replacement, or new capital projects. [No explanation is required for this part.]
The cash flows associated with a project can be represented by the following decision tree (conditional probabilities are in parentheses): Year 0 Year 1 5000 O $289.09 O $317.46 O $232.35 $400 (4) O $345.83 O $260.72 $600 (0) Year 2 $300 (5) $600 (5) $400 (5) 5600 (5) Given this data, determine the expected NPV for this project if the appropriate cost of capital is 12.84 percent. Year 3 $200 (5) $400 (5) $400 (5) SEOD (5) $300 (5) $500 (5) $600 (5) $700 (5)
For a normal project, profitability index is the ratio of: a. The net present value of the project’s net cash flow to the project’s initial investment.b. The net present value of the project’s net cash flows to the project’s IRR.c. The present value of the project’s cash flows to the project’s IRR.d. The present value of the project’s cash inflows to the project’s initial investment.e. All of the above properly describe the profitability index.
3. follows: Carnegie Corp. projects an annual cash flow for one of its divisions as Year 0 1 2 3 4 5 6 Cash flow (SM) 3 0 -10 2 2 2 2 What is the IRR for this cash flow stream? Try plotting the NPV as a function of the discount rate. Are there any problems with using IRR for this application?
Take me to the text The following table indicates the net cash flows of a capital asset: Year Net Cash Flow 0 $-13,900 1 $5,500 2 $9,600 Do not enter dollar signs or commas in the input boxes. Use the negative sign where appropriate. Round the factor to 4 decimal places and the NPV to the nearest whole number. Assume the required rate of return is 13%. Determine the net present value of this asset. Year Net Cash Flow 0 1 2 Total $-13,900 $5,500 $9,600 Factor Net Present Value SA $ A
The following table indicates the net cash flows of a capital asset: Year Net Cash Flow 0 $-159,000 1 $59,000 2 $59,000 3 $59,000 4 $59,000 Do not enter dollar signs or commas in the input boxes. Round your answer to 2 decimal places. Calculate the cash payback period using the formula method. Payback: Answer years
Here are cash flows for a project under consideration. C(0)= -$8160, C(1)=6180, and C(2)=20280. What is the IRR of the project?
There is a project with the following cash flows : Year 0 1 2 1345 Cash Flow -$ 23,350 6,300 7,400 8,450 7,350 5,900 What is the payback period?
A project has the cash flows shown in the following table. If the cost of capital is 9%, what is the NPV of the project? Year 0 1 2 3 4 5 6 Incremental Free Cash Flow -913 281 281 281 281 281 191 Question 5Answer a. $294 b. $272 c. $312 d. $325
) For each of the following, determine the expected cash flows. Cash FlowEstimate ProbabilityAssessment a. $ 4,800 20% 6,300 50% 7,500 30% b. $ 5,400 30% 7,200 50% 8,400 20% c. $(1,000) 10% 3,000 80% 5,000 10%
Which of the following cash flow streams could be evaluated using the basic Internal Rate of Return (IRR) method? A. CF1 $100 CF2 = -$20 CF3 - $20 B. CF1 =-$100 CF2 $20 CF3 $20 c. CF1 -$100 CF2 = $20 CFJ -$20 D. CF1 $100 CF2 = $20 CFJ $20 All of the above E.

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