What information does the payback period provide? Suppose Praxis Corporation's CFO is evaluating a project with the following cash inflows. She does not know the project's initial cost; however, she does know that the project's regular payback period is 2.5 years. Year Cash Flow Year 1 $375,000 Year 2 $475,000 Year 3 $450,000 Year 4 $400,000 If the project's weighted average cost of capital (WACC) is 7%, what is its NPV? O 1362,043 O $326,559 O $417,269 O $308,417

What information does the payback period provide? Suppose Praxis Corporation's CFO is evaluating a project with the following cash inflows. She does not know the project's initial cost; however, she does know that the project's regular payback period is 2.5 years. Year Cash Flow Year 1 $375,000 Year 2 $475,000 Year 3 $450,000 Year 4 $400,000 If the project's weighted average cost of capital (WACC) is 7%, what is its NPV? O 1362,043 O $326,559 O $417,269 O $308,417

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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The management of SoComfy Hotel wishes to capitalize on an investment project that will cost the management to pay $85,000 as an initial cost. This project will take three years to finish with the net cash flows stream of $18,000 for the first year, $21,000 for the second year, and $22,500 for the third year. Should the management accept the project by analyzing the net present value (NPV) of the cash flow stream if they have 12.00% minimum required rate of return on the project?
ABC Co. is considering a project that has the following cash flow What is the project's data. payback? Year 1 2 3 4 5 Cash flows -$1,150 $300 $310 $320 $330 $240 XYZ Co. is considering a project that has the following cash flow and interest rate. What's the project's discounted payback? Interest rate: 10.00% Year 1 2 3 Cash flows -$850 $360 $480 $600 3 A firm is considering Projects S and L, whose cash flows are shown below. Which project has a higher NPV, by how much? Interest rate: 10.00% Year 1 2 3 4 -$1,100 $380 $380 CFs $380 $380 -$2,000 $765 $765 CF, $765 $765 FMA Co. analyzed the project whose cash flows are shown below. 4 However, before the decision to accept or reject the project, the Federal Reserve took actions that changed interest rates and therefore the firm's interest rate. The Fed's action did not affect the forecasted cash flows. By how much did the change in the interest rate affect the project's fo: NDV2 Should the nro:
The net present value (NPV) rule is considered one of the most common and preferred criteria that generally lead to good investment decisions. Consider this case: Suppose Black Sheep Broadcasting Company is evaluating a proposed capital budgeting project (project Beta) that will require an initial investment of $2,500,000. The project is expected to generate the following net cash flows: Year Cash Flow Year 1 $325,000 Year 2 $500,000 Year 3 $475,000 Year 4 $425,000 Black Sheep Broadcasting Company’s weighted average cost of capital is 9%, and project Beta has the same risk as the firm’s average project. Based on the cash flows, what is project Beta’s NPV? -$638,127 -$788,127 -$1,113,127 $1,386,873 Please solve using excel
Compute the 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 11 percent and the maximum allowable payback is one year. Time: 0 1 2 3 4 5 Cash flow: −100 75 100 300 75 200
Company XYZ is considering an investment project that is expected to generate the following cash flows: Year 1: $500,000 Year 2: $700,000 Year 3: $800,000 Year 4: $900,000 Year 5: $1,200,000 The cost of capital for the company is 10%. Calculate the Firm's Present Value (FPV) of the cash flows. To calculate the Firm's Present Value (FPV) of the cash flows, you need to discount each cash flow to its present value using the cost of capital, and then sum up the present values of all cash flows.
A company is analyzing two mutually exclusive projects, S and L, whose cash flows are shown below: Years 0 1 2 3 4 S -1,100 900 350 100 10 L -1,100 0 300 550 850 The company's cost of capital is 12 percent, and it can get an unlimited amount of capital at that cost. The cutoff payback period is two years. Which project should the company choose based on payback period and discounted payback period? Question 5 options: Based on payback, choose project L; based on discounted payback, also choose L. Based on payback, choose project L; based on discounted payback, choose neither. Based on payback, choose project S; based on discounted payback, also choose S. Based on payback, choose project S; based on discounted payback, choose neither.
Hans
Suppose an opportunity arises to invest $10 million that will pay $5.5 million at the end of year 1 and $6.5 million at the end of year two. The cost of capital is 10%. Find NPV. Is the project a go? Show and explain Suppose the project’s cash flows are delayed a year, but not the outlay. How does that change your answer? Show and explain Suppose there is a cost overrun of 20%. The cash flows and their timing are the same as in part a. How does this change your answer? Show and explain. Suppose the second-year cash flow decreases to $5 million. The outlay and timing of the cash flows are the same as in part a. How does this change your answer? Show and explain. Evaluate the proposal. Would you undertake it?
The NPV and payback period What information does the payback period provide? Suppose ABC Telecom Inc.’s CFO is evaluating a project with the following cash inflows. She does not know the project’s initial cost; however, she does know that the project’s regular payback period is 2.5 years. Year Cash Flow Year 1 $350,000 Year 2 $500,000 Year 3 $500,000 Year 4 $400,000 If the project’s weighted average cost of capital (WACC) is 10%, what is its NPV? $280,268 $224,214 $252,241 $322,308 Which of the following statements indicate a disadvantage of using the discounted payback period for capital budgeting decisions? Check all that apply. The discounted payback period does not take the project’s entire life into account. The discounted payback period is calculated using net income instead of cash flows. The discounted payback period does not take the time value of money into account.
7. The NPV and payback period What information does the payback period provide? Suppose Praxis Corporation's CFO is evaluating a project with the following cash inflows. She does not know the project's initial cost; however, she does know that the project's regular payback period is 2.5 years. Year Cash Flow Year 1 $350,000 Year 2 $475,000 Year 3 $475,000 Year 4 $400,000 If the project's weighted average cost of capital (WACC) is 10%, what is its NPV? $278,324 $333,989 $292,240 $236,575 Which of the following statements indicate a disadvantage of using the discounted payback period for capital budgeting decisions? Check all that apply. ☐ The discounted payback period does not take the project's entire life into account. The discounted payback period does not take the time value of money into account. The discounted payback period is calculated using net income instead of cash flows. ☐
I think the payback periods are correct, I just need the different cash flows of each year + the final question at the bottom. Thank you.
Computer Consultants Inc. is considering a project that has the following cash flow and cost of capital (r) data. What is the project's MIRR? Note that a project's MIRR can be less than the cost of capital (and even negative), in which case it will be rejected. Year Cash flows r=13.00% 20.64% 18.35% 21.50% 19.32% 22.78% 0 -$1,000 1 $750 2 $600 3 $120

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