The following information will be used to answer questions 8, 9, and 10. Your company can invest in 1 of the following projects: Cash Flows Year Project A Project B 0 -70.000 -65.000 1 30.000 8.000 2 10.000 8.000 3 10.000 8,000 4 18.000 9.000 O 5.000 30.000 6 4.000 40.000 The interest rate is 8%. 8a. What is the payback period for each project? 8b. If you base your decision on which project has the shortest payback, which will you choose?

The following information will be used to answer questions 8, 9, and 10. Your company can invest in 1 of the following projects: Cash Flows Year Project A Project B 0 -70.000 -65.000 1 30.000 8.000 2 10.000 8.000 3 10.000 8,000 4 18.000 9.000 O 5.000 30.000 6 4.000 40.000 The interest rate is 8%. 8a. What is the payback period for each project? 8b. If you base your decision on which project has the shortest payback, which will you choose?

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

See similar textbooks

Similar questions

The interest rate required for a $2,050 investment to double in 5 years can be found from this equation: 4,100=2,050(1+r2)104,100=2,0501+r210 . Find the necessary rate. Your answer should be a decimal, but express it as a percentage to 2 decimal places: The rate is %
Problem #2: Consider an investment where the cash flows are: - $920.33 at time 1 = 0 (negative since this is your initial investment) S407 at time = 1 in years $222 at time = 2 in years $426 at time = 3 in years (a) Use Excel's "Solver" to find the internal rate of return (IRR) of this investment. Take a screen shot showing Solver open with your entries for the function clearly visible. Paste the screen shot into an application (like Paint), and save it as a (.png) file. Upload your screenshot below. (b) What is the value of IRR found by Solver?
不 a. Use the appropriate formula to determine the periodic deposit. b. How much of the financial goal comes from deposits and how much comes from interest? Periodic Deposit Rate Time Financial Goal $? at the end of each year 3% compounded annually 15 years $130,000 Click the icon to view some finance formulas. a. The periodic deposit is $ (Do not round until the final answer. Then round up to the nearest dollar as needed.) this View an example Get more help 4 Clear all Chec
You have an opportunity to make an investment that will pay $ 300 at the end of the first year, $ 100 at the end of the second year, $ 200 at the end of the third year, $ 400 at the end of the fourth year, and $500 at the end of the fifth year. a. Find the present value if the interest rate is 9 percent. (Hint: You can simply bring each cash flow back to the present and then add them up. Another way to work this problem is to either use the =NPV function in Excel or to use your CF key on a financial calculator —but you'll want to check your calculator's manual before you use this key. Keep in mind that with the =NPV function in Excel, there is no initial outlay. That is, all this function does is bring all the future cash flows back to the present. With a financial calculator, you should keep in mind that CF0 is the initial outlay or cash flow at time 0, and, because there is no cash flow at time 0, CF0 =0.) b. What would happen to the…
Assume you invest $15,000 today. How much will you have in six years at an interest rate of 9%? Future Value of $1: 8% 123456 1.080 1.166 1.260 1.360 1.469 1.587 OA. $23.805 OB. $25,155 OC. $26.580 OD. $23,085 9% 1.090 1.188 1.295 1.412 1.539 1.677 10% 1.100 1.210 1.331 1.464 1.611 1.772 MAKED ہے
Consider the following cash flows and interest rates: 0 r = 2.5% 1 r = 1.5% 5,000 2 r = 1.9% 5,000 3 r = 2.4% 5,000 a. Calculate the present value of these cash flows (at time 0). b. Calculate the future value of these cash flows (at time 4). 4
The current amount A of a principal P invested in a savings account paying an annual interest rate r is given by A = P(1+r/n)^(rt) where n is the number of times per year the interest is compounded. For continuous compounding, A = Pe^(rt). Suppose $10,000 is initially invested at 2.5 percent (r = 0.025). a. Plot A versus t for 0 ≤ t ≤ 20 years for four cases: continuous compounding, annual compounding (n = 1), quarterly compounding (n = 4), and monthly compounding (n = 12). Show all four cases on the same subplot and label each curve. On a second subplot, plot the difference between the amount obtained from continuous compounding and the other three cases. b. Redo part a, but plot A versus t on log-log and semilog plots. Which plot gives a straight line?
Damien offers you a sequence of end-of-year cash flows for an investment as follows: Year 1 2 3 4 4 What is the value of the cash flows if the opportunity cost is 6 percent? (Round to the nearest dollar). Please click on the following link to access a blank worksheet Click to open:: O $8.392 $8.598 Cash Flow $4,000 $3,000 $2,000 $1,000 $8.734 $8.915
1.4 The table represents the cash flows received from the investments at the end year. Each investment requires an initial investment of $1000. Answer the questions related to the two investment opportunities in the table below. Year 1 2 3 4 5 Investment A 225 215 250 225 205 Investment B 220 225 250 250 210 There are two approaches to evaluate this investment. Show the necessary calculations. • Assume the interest rate ot 4.33%. Use present value analysis to determine which investment you should choose? Calculating the rate of returns of the investment, which investment would you choose and why?
is 22 percent? Future Value and Multiple Cash Flows Wells, Inc., has identified an investment project with the following cash flows. If the discount rate is 8 LO 1 3. percent, what is the future value of these cash flows in Year 4? What is the future value at an interest rate of 11 percent? At 24 percent? Year Cash Flow $ 865 1,040 1,290 1,385 1 2 3 4
Suppose an investment will pay $11,000 in 41 years from now. If you can earn 14.55% interest compounded monthly by depositing your money in a bank, how much should you pay for the investment today?Round your answer to two decimal places. For example, if your answer is $345.667 round as 345.67 and if your answer is .05718 or 5.718% round as 5.72. A. $31.59 B. $31.30 C. $26.04 D. $25.74 E. $29.25
Mendez Company has identified an investment project with the following cash flows. Year Cash Flow 1 2 3 $780 1,050 1,310 1,425 a. If the discount rate is 8 percent, what is the present value of these cash flows? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What is the present value at 17 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. What is the present value at 25 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) a. Present value at 8% b. Present value at 17% c. Present value at 25%

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS