Wilson's Antiques is considering a project that has an initial cost today of $10,000. The project has a two-year life with cash inflows of $6,500 a year. Should Wilson's decide to wait one year to commence this project, the initial cost will increase by 5 percent and the cash inflows will increase to $7,500 a year. What is the value of the option to wait if the applicable discount rate is 10 percent? Question 14Select one: a. $1,735.54 b. $1,509.28 c . $1,606.76 d. $1, 235.54 e. $1,006.76

Wilson's Antiques is considering a project that has an initial cost today of $10,000. The project has a two-year life with cash inflows of $6,500 a year. Should Wilson's decide to wait one year to commence this project, the initial cost will increase by 5 percent and the cash inflows will increase to $7,500 a year. What is the value of the option to wait if the applicable discount rate is 10 percent? Question 14Select one: a. $1,735.54 b. $1,509.28 c . $1,606.76 d. $1, 235.54 e. $1,006.76

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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(Net present value calculation) Dowling Sportswear is considering building a new factory to produce aluminum baseball bats. This project would require an initial cash outlay of $6,000,000 and would generate annual net cash inflows of $1,100,000 per year for 9 years. Calculate the project's NPV using a discount rate of 5 percent. If the discount rate is 5 percent, then the project's NPV is $___________________(Round to the nearest dollar.)
(Discounted payback period) Gio's Restaurants is considering a project with the following expected cash flows: Year 0 1 2 60 3 100 4 105 (Click on the icon in order to copy its contents into a spreadsheet.) Project Cash Flow (millions) $(180) 100 If the project's appropriate discount rate is 8 percent, what is the project's discounted Davback period? The project's discounted payback period is years. (Round to two decimal places.)
A Moving to another question will save this response. Question 20 Solar Energy is currently examining a project that will produce cash inflows of $21,405 a year for two years followed by $12.390 in year 3. The cost of the project is $38,716. What is the profitability index of the project if the discount rate is 11 percent? A Moving to another question will save this response. O Type here to search
Fargo Inc. is considering a project that will require an initial investment of $1.5 million. The project will provide incremental cash inflows of $600,000 for the next five years. If the required return on the project is 15%, what is its discounted payback? If the company’s investment cutoff threshold is three years, should the project be given the go-ahead? Select one: a. 3 years and 4.55 months; yes b. 3 years and 4.55 months; no c. 4 years and 11.55 months; yes d. 4 years and 11.55 months; no e. 5 years and 1 month; no
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a. What is the net present value (at the discount rate of 10%) of this project?b. Perot’s engineers have determined that spending $10 million more on development will allow them to add even more advanced features. Having a more advanced chip will allow them to price the chip $50 higher in both years ($870 for year 1 and $700 for year 2). What is the NPV of the project if this option is implemented?c. If sales are only 200,000 the first year and 100,000 the second year, what would the NPV of the project be? Assume the development costs and sales price are as originally estimated. Development cost - $1,250,000Estimated development time - 9 monthsPilot testing - $200,000Ramp-up cost - $400,000Marketing and support cost - $150,000/yrSales & Production volume - $60,000/yrUnit production cost - $100Unit price - $205Interest rate - 8%
Management of Daniel Jackson, a confectioner, is considering purchasing a new jelly bean-making machine at a cost of $256,144. They project that the cash flows from this investment will be $102,150 for the next seven years. If the appropriate discount rate is 14 percent, what is the IRR that Daniel Jackson management can expect on this project? (Do not round discount factors. Round other intermediate calculations to 0 decimal places e.g. 15 and final answer to 2 decimal places, e.g. 5.25%.)
You are evaluating a project that costs $75,000 today. The project has an inflow of $160,000 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?
← (Net present value calculation) Big Steve's, makers of swizzle sticks, is considering the purchase of a new plastic stamping machine This investment requires an initial outlay of $105,000 and will generate net cash inflows of $17,000 per year for 9 years a. What is the project's NPV using a discount rate of 11 percent? Should the project be accepted? Why or why not? b. What is the project's NPV using a discount rate of 16 percent? Should the project be accepted? Why or why not? c. What is this project's internal rate of return? Should the project be accepted? Why or why not?
A new computer system will require an initial outlay of $19,000, but it will increase the firm’s cash flows by $3,800 a year for each of the next 8 years. How high can the discount rate be before you would reject the project? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places
Your firm is considering a project that will cost $4.719 million up front, generate cash flows of $3.55 million per year for 3 years, and then have a cleanup and shutdown cost of $5.96 million in the fourth year. a. How many IRRS does this project have? b. Create an NPV profile for this project (plot the NPV as a function of the discount rate-see the appendix). (NOTE: students will solve this question part using Excel only. A student response is not included in MyFinanceLab). c. Given a cost of capital of 9.9% should this project be accepted? a. The project has IRRS. (Select from the drop-down menu.) 2 3 4
A project that provides annual cash flows of $14,000 for nine years costs $70,000 today. At what discount rate would you be indifferent between accepting the project and rejecting it? Should you accept the project in the previous question if your cost of capital is equal to 15%?

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