Use the NPV method to determine whether Smith Products should invest in the following projects: Project A: Costs $270,000 and offers eight annual net cash inflows of $57,000. Smith Products requires an annual return of 14% on investments of this nature. Project B: Costs $390,000 and offers 10 annual net cash inflows of $74,000. Smith Products demands an annual return of 12% on investments of this nature. E(Click the icon to view Present Value of $1 table.) (Click the icon to view Present Value of Ordinary Annuity of $1 table.) Read the requirements. Requirement 1. What is the NPV of each project? Assume neither project has a residual value. Round to two decimal places. (Enter any factor amounts to three decimal places, X.XXX. Use parentheses or a minus sign for a negative net present value.) Caclulate the NPV (net present value) of each project. Begin by calculating the NPV of Project A. Project A: Net Cash Annuity PV Factor Present Years Inflow (i=14%, n=8) Value 1-8 Present value of annuity Investment Net present value of Project A Calculate the NPV of Project B. Project B: Net Cash Annuity PV Factor Present Years Inflow (i=12%, n=10) Value

Use the NPV method to determine whether Smith Products should invest in the following projects: Project A: Costs $270,000 and offers eight annual net cash inflows of $57,000. Smith Products requires an annual return of 14% on investments of this nature. Project B: Costs $390,000 and offers 10 annual net cash inflows of $74,000. Smith Products demands an annual return of 12% on investments of this nature. E(Click the icon to view Present Value of $1 table.) (Click the icon to view Present Value of Ordinary Annuity of $1 table.) Read the requirements. Requirement 1. What is the NPV of each project? Assume neither project has a residual value. Round to two decimal places. (Enter any factor amounts to three decimal places, X.XXX. Use parentheses or a minus sign for a negative net present value.) Caclulate the NPV (net present value) of each project. Begin by calculating the NPV of Project A. Project A: Net Cash Annuity PV Factor Present Years Inflow (i=14%, n=8) Value 1-8 Present value of annuity Investment Net present value of Project A Calculate the NPV of Project B. Project B: Net Cash Annuity PV Factor Present Years Inflow (i=12%, n=10) Value

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 that provides annual cash flows of $22,500 for 7 years costs $84,000 today. a. If the required return is 12 percent, what is the NPV for this project? b. Determine the IRR for this project.
Assume you are the finance manager of Almanor Company, and the company is considering investing in one of the three projects. The life for both the Projects X, M and Project Y is 5 years. Project X costs OMR. 20500, Project M costs OMR. 20500 and Project Y costs OMR.20500. The discount rate/cost of capital is 4.15%. Required: Use the following techniques to help company to decide which Machine is better and justify why? a) Payback period b) Discount payback period c) Net Present Value d) Present value index -Profitability index. Year Project X Project M Project Y 7865 3748 8752 4567 7609 8393 3. 9676 4628 4508 7292 8905 7836 9904 0066 8287 (Ctrl) - 45
A project has cash flows of -$148,000, $43,000, $87,000, and $44,000 for Years 0 to 3, respectively. The required rate of return is 11 percent. Based on the internal rate of return of the project. percent for this project, you should
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
There are two projects under consideration by the Rainbow factory. Each of the projects will require an initial investment of $35,000 and is expected to generate the following cash flows: First Year Second Year Third Year Total Alpha Project $32,500 $23,000 $5,500 $61,000 Beta Project 8,000 23,000 28,000 59,000 (Click here to see present value and future value tables) https://openstax.org/books/principles-managerial-accounting/pages/time-value-of-money A. If the discount rate is 12%, compute the NPV of each project. Round your present value factor to three decimal places and final answer to answer to 2 decimal places. Alpha Project...? Beta Project...?
Please answer the following questions using the information below: NPV. Using a 10% required rate of return, calculate the NPV for this project. Should it be accepted or rejected? PI. Calculate the Profitability Index (PI) for this project. Should it be accepted or rejected? Consider the following cash flows: Year 0 1 2 3 4 5 6 Cash Flow -$8,000 $3,000 $3,600 $2,700 $2,500 $2,100 $1,600 Payback. The company requires all projects to payback within 3 years. Calculate the payback period. Should it be accepted or rejected? Discounted Payback. Calculate the discounted payback using a discount rate of 10%. Should it be accepted or rejected? IRR. Calculate the IRR for this project. The company’s required rate of return is 10%. Should it be accepted or rejected? NPV. Using a 10% required rate of return, calculate the NPV for this project. Should it be accepted or rejected? PI. Calculate the Profitability Index (PI) for this project. Should it be accepted or rejected?…
Assume you are the finance manager of Methanol Company, and the company is considering investing in one of the two projects. The life for both the Projects X and Project Y is 6 years. Project X costs OMR. 20500 and Project Y costs OMR.20500. The discount rate/cost of capital is 3.55%. Required: Use the following techniques to help company to decide which Machine is better and justify why? a) Payback period b) Discount payback period c) Net Present Value d) Present value index -Profitability index.
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.)
I need to know the Cash payback period for each project, the Net present value, the annual rate of return for each project and finally I need the projects ranked best to worse (1, 2, 3) on their cashpayback, net present value, and annual return. Finally I need to know which is the best project. Question 1 of 1 > E Pharoah Company is considering three long-term capital investment proposals. Each investment has a useful life of 5 years. Relevant data on each project are as follows. Project Bono Project Edge Project Clayton Capital investment $172,000 $182,000 $202,000 Annual net income: Year 1 14,700 18,900 28,350 2 14,700 17,850 24,150 3 14,700 16,800 22,050 4 14,700 12.600 13,650 5 14,700 9,450 12,600 5 14,700 9,450 12,600 Total $73,500 $75,600 $100,800 Depreciation is computed by the straight-line method with no salvage value. The company's cost of capital is 15%. (Assume that cash flows occur evenly throughout the year.)
You are evaluating a project that costs $75,000 today. The project has an inflow of $ 155,000 in one year and an outflow of $65,000 in two years. What are the IRRs for the project? What discount rate results in the maximum NPV for this project? How can you determine that this is the maximum NPV?
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?
Company A is considering two investment projects, Project X and Project Y. The initial investments and projected annual cash flows for each project are as follows: Project X: Initial Investment: $10,000 Annual Cash Flows: $2,500 for 5 years Project Y: Initial Investment: $15,000 Annual Cash Flows: $5,750 for 3 years Using the roll-over method, determine which project should be selected. Assume a 6% discount rate. The NPV of the preferred project is??

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