This is a two-part question.Scotch can expand a successful manufacturing line for an immediate investment of $91 million. The company anticipates that the project will generate a cash flow of $172 million in 10 years (and only in that one year). Thecompany considers the required rate of return of the project to be 12.60%PART 1. Calculate the project's internal rate of return:%Notes on Formatting: Place your answer in PERCENTAGE form with two decimal places of accuracy. For example, if your answer is thirteen point seventy five percent, then place your answer as 13.75 and NOT as .1375.NOW GO ON TO THE SECOND PART!PART 2. Given your estimate of the IRR, should Scotch accept or reject the project? Type the word "accept" if you believe they should go ahead with the project or the word "reject" if you believe they should not go ahead with theproject.

Answered: This is a two-part question. Scotch can…

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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Find the NPV of a project that costs $694,000 today and generates expected cash flows in each of the next three years of $155,000; $221,000; and $371,000. Use 10% as the cost of capital. Round your answer to the nearest dollar. Be sure you enter a negative sign (-) if your answer is a negative number.
Give typing answer with explanation and conclusion Bennett Company has a potential new project that is expected to generate annual revenues of $258,500, with variable costs of $142,400, and fixed costs of $60,100. To finance the new project, the company will need to issue new debt that will have an annual interest expense of $22,500. The annual depreciation is $24,400 and the tax rate is 21 percent. What is the annual operating cash flow? Multiple Choice $43,260 $125,860 $49,364 $176,216 $80,400
Fancy Cat Products has a project that will cost $247,500 today and will generate monthly cash flows of $5,435 for the next 60 months. What is the rate of return of this project when expressed as an APR? Multiple Choice 13.07% 10.55% 11.75% 9.96% 11.43%
Yokam Company is considering two alternative projects. Project 1 requires an initial investment of $400,000 and has a present value of cash flows of $1,100,000. Project 2 requires an initial investment of $4,000,000 and has a present value of cash flows of $6,000,000. 1. Compute the profitability index for each project. 2. Based on the profitability index, which project should the company prefer? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Compute the profitability index for each project. Project 1 Project 2 Choose Numerator: Profitability Index T 7 Choose Denominator: 4 of 5 180 # Next > G O
Connor Corporation is considering two projects (see below). For your analysis, assume these projects are mutually exclusive with a required rate of return of 12%. project 1 project 2 initial investment $(510,000) $(685,000) cash flow year 1 485,000 610,000 Compute the following for each project: NPV (net present value) PI (profitability index) IRR (internal rate of return) Based on your analysis, answer the following questions : Which is the best choice? Why? Which project should be selected and why? If the projects had the same IRR amounts but different NPV totals, then how would you know which project to select? Explain.
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?
aa
Note: Just answer the letter d) PROFITABILITY INDEX
Calculate the accounting rate of return for project A and B.
NPV Calculate the net present value (NPV) for a 15-year project with an initial investment of $30,000 and a cash inflow of $8,000 per year. Assume that the firm has an opportunity cost of 17%. Comment on the acceptability of the project. The project's net present value is $ (Round to the nearest cent.)
Phoenix Company can invest in each of three cheese-making projects: C1, C2, and C3. Each project requires an initial investment of $228,000 and would yield the following annual cash flows. 1. Assuming that the company requires a 12% return from its investments, use net present value to determine which projects, if any, should be acquired. 2. Using the answer from part 1, is the internal rate of return higher or lower than 12% for Project C2?
Novak Company is contemplating an investment costing $168,810. The investment will have a life of 8 years with no salvage value and will produce annual cash flows of $30,500. Click here to view PV tables. What is the approximate internal rate of return associated with this investment? (Use the above table.) (Round answer to O decimal places, e.g. 15%) Internal rate of return. %6

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