The Square Box is considering two independent projects, both of which have an initial cost of $18,000. The cash inflows of Project A are $3,000, $7,000, and $10,000 over the next three years, respectively. The cash inflows for Project B are $3,000, $7,000, and $15,000 over the next three years, respectively. The required return is 12 percent and the required discounted payback period is 3 years. Based on discounted payback, which project(s), if either, should be accepted? O Project A should be rejected and Project B should be accepted. O Project A should be accepted and Project B should be rejected. O You should be indifferent to accepting either or both projects. Both projects should be accepted. Both projects should be rejected.

The Square Box is considering two independent projects, both of which have an initial cost of $18,000. The cash inflows of Project A are $3,000, $7,000, and $10,000 over the next three years, respectively. The cash inflows for Project B are $3,000, $7,000, and $15,000 over the next three years, respectively. The required return is 12 percent and the required discounted payback period is 3 years. Based on discounted payback, which project(s), if either, should be accepted? O Project A should be rejected and Project B should be accepted. O Project A should be accepted and Project B should be rejected. O You should be indifferent to accepting either or both projects. Both projects should be accepted. Both projects should be 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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A project in NU will cost $200,000 for planning and $40,000 in each of the next six years. It is expected to generate $40,000 revenues per year permanently. Additional revenues will be gained in the pattern of an arithmetic gradient with $20.000 in the first year, declining by $4,000 per year to zero in the sixth year. What is the Rate of Return of this project?
A four-year life project has an initial capital expenditure of $3,000 and annual operating costs beginning at the end of the year 1 of $2,000. At the end of the years of 2, 3, and 4 the project receives $7,000 as income. Assume that the cash flows given are in today dollars, and that incomes are escalated at 5%, costs are escalated at 6%, and inflation is 3%. Calculate the IRR in constant dollar. O 57% O 25% O 34% O 15%
An investment project provides cash inflows of $950 per year for eight years. a. What is the project payback period if the initial cost is $3,450? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) b. What is the project payback period if the initial cost is $4,500? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) c. What is the project payback period if the initial cost is $8,600? (Enter 0 if the project never pays back. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
Billabong Tech uses the internal rate of return (IRR) to select projects. Calculate the IRR for each of the following projects and recommend the best project based on this measure. Project T-Shirt requires an initial investment of $26,500 and generates cash inflows of $9,000 per year for 7 years. Project Board Shorts requires an initial investment of $38,333 and produces cash inflows of $12,500 per year for 8 years. The IRR of project T-Shirt is %. (Round to two decimal places.)
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?
Two projects, Alpha and Beta, are being considered using the payback method. Each has an initial cost of $100,000. The annual cash flows for each project are listed below. a) What is the pay back period in years for Alpha? (round to two decimal places) b) What is the pay back period in years for Beta? (round to two decimal places) Year Project Alpha Project Beta 1 25,000 15,000 2 25,000 25,000 3 25,000 45,000 4 25,000 30,000 5 25,000 20,000 25,000 15,000
A project has the following cash flows. It costs $15,000. It briongs in $22,000 after one year, and costs an adittional $6,500 after two years. The Required rate of return is 11%. Calculate the MIRR using the combination approach.
An investment project provides cash inflows of $850 per year for five ears. What is the project payback period if the initial cost is $5,600?
Perform a financial analysis for a project. Assume that the projected costs and benefits for this project are spread over 6 years as follows. Estimated costs are $1,100,000 in Year 0, and $50,000 each year in Years 1, 2, 3, 4, 5 and 6. Estimated benefits are $0 in Year 0, and $450,000 each year in Years 1, 2, 3, 4, 5 and 6. Use a 15% discount rate. Suppose the required payback period and discounted payback period are both 3 years. (1) Calculate the payback period (based on the original cash flows without discounting), and evaluate the project based on the payback method. (2) Calculate the discounted payback period (based on discounted cash flows), and evaluate the project based on the discounted payback method. (3) Evaluate the project using the NPV method, and explain whether you would recommend investing in this project.
A new project will have an intial cost of $15,000. Cash flows from the project are expected to be $4,000, $6,000, and $8,000 over the next 3 years, respectively. Assuming a discount rate of 10%, what is the project's IRR?
The Square Box is considering two independent projects, both of which have an initial cost of $18,000. The cash inflows of Project A are $3,000, $7,000, and $10,000 over the next three years, respectively. The cash inflows for Project B are $3,000, $7,000, and $15,000 over the next three years, respectively. The required return is 12 percent and the required discounted payback period is 3 years. Based on discounted payback, which project(s), if either, should be accepted? Group of answer choices Project A should be rejected and Project B should be accepted. Both projects should be accepted. Project A should be accepted and Project B should be rejected. Both projects should be rejected. You should be indifferent to accepting either or both projects.
A project has an initial cost of $7,000. The cash inflows are $1,000, $2,600, $3,200, and $4,000 over the next four years, respectively. What is the payback period?

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