Perkins, Inc., is considering an investment of $378,000 in an asset with an economic lifeof 5 years. The firm estimates that the nominal annual cash revenues and expenses atthe end of the first year will be $258,000 and $83,000, respectively. Both revenues andexpenses will grow thereafter at the annual inflation rate of 2 percent. The company willuse the straight-line method to depreciate its asset to zero over five years. The salvagevalue of the asset is estimated to be $58,000 in nominal terms at that time. The one-timenet working capital investment of $16,500 is required immediately and will be recoveredat the end of the project. The tax rate is 23 percent.What is the project's total nominal cash flow from assets for each year? (A negativeanswer should be indicated by a minus sign. Do not round intermediate calculationsand round your answers to the nearest whole dollar, e.g., 32.)Year 0Year 1Year 2Year 3Year 4Year 5$$$6A6A$$$Cash Flow-394,500149,470152,165154,914157,718205,238

Cash flow is the flow of money into and out of a firm over a given time period. It is usually…

What is the project's total nominal cash flow from assets for each year? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to the nearest whole dollar, e.g., 32.) Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 $ $ $ $ $ $ Cash Flow -394,500 149,470 152,165 154,914 157,718 205,238

What is the project's total nominal cash flow from assets for each year? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to the nearest whole dollar, e.g., 32.) Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 $ $ $ $ $ $ Cash Flow -394,500 149,470 152,165 154,914 157,718 205,238

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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Similar questions

A project has the following cash flows: Cash Year Flow 16,300 1 7,000 8,300 6,800 2 3 a. What is the NPV at a discount rate of zero percent? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) b. What is the NPV at a discount rate of 12 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. What is the NPV at a discount rate of 19 percent? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) d. What is the NPV at a discount rate of 28 percent? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) а. NPV b. NPV C. NPV NPV
Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) -$ -$ 0 1235 4 NO a- Whichever project you choose, if any, you require a return of 14 percent on your investment. Project A Project B 357,000 38,000 58,000 58,000 433,000 a-1. What is the payback period for each project? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) 46,500 23,300 21,300 18,800 13,900 Project A Project B Payback period If you apply the payback criterion, which investment will you choose? 2. O Project A O Project B years years b- What is the discounted payback period for each project? (Do not round intermediate 1. calculations and round your answers to 2 decimal places, e.g., 32.16.) Discounted payback period years years
The following are the cash flows of two independent projects: Year Project A Project B 0 $ (270 ) $ (270 ) 1 150 170 2 150 170 3 150 170 4 150 a. If the opportunity cost of capital is 12%, calculate the NPV for both projects. (Do not round intermediate calculations. Round your answers to 2 decimal places.)
Compute the IRR statistic for Project E. The appropriate cost of capital is 8 percent. (Do not round intermediate calculations and round your final answer to 2 decimal places.) Project E Time: 0 1 2 3 4 5 Cash flow −$1,300 $470 $570 $580 $360 $160 IRR?
Consider the following project: Period Net cash flow 0 -100 1 0 2 78.55 3 78.55 The internal rate of return is 20%. The NPV, assuming a 20% opportunity cost of capital, is exactly zero. Calculate the expected economic income and economic depreciation in each year. (Negative answers should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to 2 decimal places.) 1 Period 2 3 Change in value (economic depreciation) (20.00) 54.55 65.46 Expected economic income
ces Duo Corporation is evaluating a project with the following cash flows: Year 0 Cash Flow -$ 29,100 -2345 1 11,300 14,000 15,900 13,000 -9,500 The company uses a discount rate of 12 percent and a reinvestment rate of 7 percent on all of its projects. a. Calculate the MIRR of the project using the discounting approach. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. Calculate the MIRR of the project using the reinvestment approach. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) c. Calculate the MIRR of the project using the combination approach. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a. Discounting approach MIRR b. Reinvestment approach MIRR % c. Combination approach MIRR %
Duo Corporation is evaluating a project with the following cash flows: Year Cash Flow 0 −$ 16,800 1 7,900 2 9,100 3 8,700 4 7,500 5 −4,900 The company uses an interest rate of 9 percent on all of its projects. Calculate the MIRR of the project using all three methods. Note: Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.
Mendez Company has identified an investment project with the following cash flows. Year Cash Flow 1 2 3 $780 1,050 1,310 1,425 a. If the discount rate is 8 percent, what is the present value of these cash flows? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What is the present value at 17 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. What is the present value at 25 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) a. Present value at 8% b. Present value at 17% c. Present value at 25%
Compute the internal rate of return for the cash flows of the following two projects. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) Year Project A 0 -$13,800 Project B -$ 11,400 1 5,400 2,900 2 6,200 8,500 3 5,000 4,600 Project A Project B % %
Consider the following two mutually exclusive projects: Year Cash Flow (X) Cash Flow (Y) 0 -$ 15,900 -$ 15,900 1 6,710 7,290 2 7,290 7,730 3 4,810 3,630 a. What is the IRR of Project X? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decim b. What is the IRR of Project Y? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decim c. What is the crossover rate for these two projects? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decim a. IRR b. IRR % % c. Crossover rate %
Compute the NPV for Project M if the appropriate cost of capital is 9 percent. (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your final answer to 2 decimal places.) Project M Time in Years 0 1 2 3 4 5 Cash flow: -$3,500 $750 $880 $920 $1,000 $500
Crenshaw Enterprises has gathered projected cash flows for two projects. s Year Project I Project J 07234 -$ 254,000 -$ 254,000 1 114,600 87,400 103,800 99,400 101,400 108,400 87,800 76,800 a. At what interest rate would the company be indifferent between the two projects? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. b. Which project is better if the required return is above this interest rate?

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