You are considering an investment opportunity that requires an initial investment of $148 million in period 0. Starting in one year, it will generate $11.2 million per year in perpetuity (i.e. every year forever). The cost of cap 13%. What is the IRR (the internal rate of return) for the project? [Note that getting the actual value should not require trial and error or a financial calculator, because this is a simple case.l

You are considering an investment opportunity that requires an initial investment of $148 million in period 0. Starting in one year, it will generate $11.2 million per year in perpetuity (i.e. every year forever). The cost of cap 13%. What is the IRR (the internal rate of return) for the project? [Note that getting the actual value should not require trial and error or a financial calculator, because this is a simple case.l

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 an initial cost of $ 55,000, expected net cash inflows of $10,000 per year for 10 years, and a cost of capital of 9%. What is the project's NPV ? (Hint: Begin by constructing a time line.) Do not round intermediate calculations. Round your answer to the nearest cent.
You are considering investing in a project that has an initial cost of $18,000, a WACC of 15%, with the estimated net cashflows for years 1, 2, 3 being equal to $20,000, $ 10,000, $6,000. Would you accept this project? _____________, Why?
You are planning to issue debt to finance a new project. The project will require $20.86 million in financing and you estimate its NPV to be $15.199 million. The issue costs for the debt will be 2.7% of face value. Taking into account the costs of external financing, what is the NPV of the project? The new NPV will be $ __ ? (Round to the nearest dollar.)
You are considering an investment with the following characteristics. The investment will cost you $551 today, but will pay you annual benefits of $107 for 11 years starting at the end of the first year. The relevant opportunity cost of capital is 9%. What is the NPV of this investment? Round your answer to two decimals. Enter negative values with a - sign. Don't enter the $-symbol as part of your answer.
I have two projects that I am evaluating: project A, where the initial investment is 5,000TL and the annual return is 5,000TL, and project B where the initial investment is 8,000TL and annual return is 6,000TL. Both projects are for 5 years. I have done my calculations and I cannot select between these two. What is my MARR? Write your answer as a decimal number, with at least one digit after the decimal point. If your result is 10.5% just write 10.5 (DO NOT write it as 0.105 or DO NOT put a percentage sign)
Consider a public project with a forecast period of 20 years. The discount rate is 3.5%.The net benefit in year 20 is forecast to be 10. You expect that each year from year 20,conditional on making it to year t≥20, there is only an 80% chance of continuing anotheryear. Net benefits grow 2% per year as long as the project continues.a) What is the discount factor (δ) b) What is the horizon value?
An investment has a cost of $3500. The investment will have a payout of X at the end of the first year. This initial payout X will grow at the rate of 12% per year for the next 4 years, then by 7% per year for the next 4 years, and then at the rate of 3% per year for the following 3 years. You believe the riskiness of this investment is 9%. Calculate the smallest X that would entice you to invest.
A project has an initial cost of $50,000, expected net cash inflows of $11,000 per year for 10 years, and a cost of capital of 14%. What is the project's NPV? (Hint: Begin by constructing a time line.) Do not round intermediate calculations. Round your answer to the nearest cent.
Alternative Uno has a first cost of $10,000 and annual expenses of $3000, whereas Alternative Dos has a first cost of $35,000, annual expenses of $2000, and a recurring cost of $5000 every 10 years. If both alternatives have an infinite life, which of the following equations can be used to solve for the rate of return on the incremental investment? (a) 0 = −$25, 000 + $1000/i − $5000(A/F, i, 10) (b) 0 = −$25, 000 + $1000/i + $5000(A/P, i, 10)/i (c) 0 = −$25, 000 + $1000/i − $5000(A/F, i, 10)/i (d) 0 = +$25, 000 − $1000/i + $5000(A/F, i, 10)?
A project that provides annual cash flows of $16,900 for eight years costs $75,000 today. What is the NPV for the project if the required return is 7 percent? What is the NPV for the project if the required return is 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.) At what discount rate would you be indifferent between accepting the project and rejecting it? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Suppose that a one-year project that requires an initial investment of $5 million has a 65% chance of generating $12 million income, a 5% chance of generating $7 million income, a 10% chance of generating $3 million income and a 20% chance of generating nothing.What is the project’s 90% one-year VaR? What is the meaning of it?
A project that provides annual cash flows of $16,900 for eight years costs $75,000 today. What is the NPV for the project if the required return is 7 percent? What is the NPV for the project if the required return is 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.) At what discount rate would you be indifferent between accepting the project and rejecting it? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

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