Vazeer hydraulics limited is considering an investment proposal involving an outlay of Rs, 45,00,000. The expected cash flows and certainty equivalent coefficients are: The rise-free interest rate is 5 percent. Calculate the net present value of the proposal. Year Expected Cash flow Certainty Equivalent co-efficient 1 Rs 1,000,000 0.90 2 Rs 1,500,000 0.85 3 Rs 2,000,000 0.82 4 Rs 2,500,000 0.78

Vazeer hydraulics limited is considering an investment proposal involving an outlay of Rs, 45,00,000. The expected cash flows and certainty equivalent coefficients are: The rise-free interest rate is 5 percent. Calculate the net present value of the proposal. Year Expected Cash flow Certainty Equivalent co-efficient 1 Rs 1,000,000 0.90 2 Rs 1,500,000 0.85 3 Rs 2,000,000 0.82 4 Rs 2,500,000 0.78

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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Referring to the table below, calculate the Net Present Value (NPV) and Profitability Index (PI). The required rate of return for these projects is USD10%. The projects’ expected cash flows are as follows: Year Machine 1 (USD) Machine 2 (USD) 0 (17,000) (17,000) 1 8,000 2,000 2 7,000 5,000 3 5,000 9,000 4 3,000 9,500
An investment has an installed cost of $787,350. The cash flows over the four-year life of the investment are projected to be $312,615, $304,172, $245,367, and $229,431. a. If the discount rate is zero, what is the NPV? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) b. If the discount rate is infinite, what is the NPV? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations
Bronx Steel, Inc., has a project with the following cash flows: Year Cash Flow 0 –$ 24,200 1 11,600 2 12,250 3 10,075 The appropriate discount rate is 13 percent. What is the IRR for this project?
ABC Corporation is considering an investment project proposal that requires an initial outlay of RM500,000. The project is expected to provide net cash inflows of RM125,000 in year 1, RM250,000 in year 2, RM300,000 in year 3, RM225,000 in year 4, RM100,000 in year 5, RM25,000 in year 6 and RM0 in year 7. (a) Compute the payback period for the project.(b) Compute the net present value of the project if the firm estimates its cost of capital to be 14%. Based on the project’s net present value, should Awesome Corporation make thisinvestment? Why?(c) Why is net present value considered to be a superior method of evaluating the cash flows from a project?(d) Evidence suggests that in spite of the theoretical superiority of net present value, financial managers use the internal rate of return approach just as often as the net present value method.Discuss the above statement.
An investment project has annual cash inflows of $5,000, $3,300, $4,500, and $3,700, for the next four years, respectively. The discount rate is 14 percent. a. What is the discounted payback period for these cash flows if the initial cost is $5,100? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What is the discounted payback period for these cash flows if the initial cost is $7,200? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. What is the discounted payback period for these cash flows if the initial cost is $10,200? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) a. Discounted payback period b. Discounted payback period c. Discounted payback period years years years
Compute the discounted payback statistic for Project Y and recommend whether the firm should accept or reject the project with the cash flows shown as follows if the appropriate cost of capital is 12 percent and the maximum allowable discounted payback is three years. Time: 0 1 2 3 4 5 Cash flow: −5,000 500 2,000 3,000 1,500 500
You are considering a project with an initial cost of $8245 and a required return of 11.6%. What is the discounted payback if the expected cash flows are $3148, $3429, $2731, $3048, and $3930 respectively over the next 5 years? a. 3.66 years b. 3.66 years c. 3.36 years ✔ d. 2.96 years e. 2.98 years
The total investment required for two projects are estimated at OMR90, 000. The cash flows expected from the two projects for the first four years are explained in the table below. Year Project A Year 1 25,000 Year 2 38,500 Year 3 42,000 Year 4 48,000 What will be pay back period? a. 3.03 O b. 3.23 O c. 2.86 O d. All the options are wrong e. 2.63
Vital Silence, Inc., has a project with the following cash flows: Year Cash Flow 0 –$ 27,800 1 11,800 2 14,800 3 10,800 The appropriate discount rate is 18 percent. What is the IRR for this project? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
The Star company, is considering two mutually exclusive projects. The expected cash flow values for each project are as follows: Period 0 1 2 3 4 Project A ($2.000.000) 900.000 600.000 500.000 800.000 Project B ($2.000.000) 700.000 700.000 700.000 700.000 With the required rate of return for these projects at 15%, calculate: a. Payback Period (PB), Net Present Value (NPV) and Internal Rate of Return (IRR) for both projects. b. Which project would you choose? Describe your answer
3. Consider the following cash flows of the independent project. Assume discount rate is 12%. Years 3 Cash flow 40,000 0 (110,000) a. Find the Discounted Payback period (DPBP). b. Find the Net present value(PW) 1 2 20,000 30,000 c. Find the Internal rate of return (IRR) d. Find the External Rate of Return (ERR) 4 50,000 5 70,000

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