You are given the following data for a project that is to be evaluated using the APV method. Year 3 $138,500 $10,000 $84,000 $30,000 $140,000 EBIT CAPEX Depreciation Increase in NWC Year-end net debt $80,000 O $201.765 O $185,617 O $193,822 O $222,872 1 Cost of net debt = 8% Unlevered cost of capital - 11.8% Corporate tax rate - 30 % Calculate the total value of the project at t-0, using the APV method. O $213,918 $127,000 $60,000 $72,000 $50,000 $100,000 2 $133,000 $40,000 $80,000 $60,000 $140,000

You are given the following data for a project that is to be evaluated using the APV method. Year 3 $138,500 $10,000 $84,000 $30,000 $140,000 EBIT CAPEX Depreciation Increase in NWC Year-end net debt $80,000 O $201.765 O $185,617 O $193,822 O $222,872 1 Cost of net debt = 8% Unlevered cost of capital - 11.8% Corporate tax rate - 30 % Calculate the total value of the project at t-0, using the APV method. O $213,918 $127,000 $60,000 $72,000 $50,000 $100,000 2 $133,000 $40,000 $80,000 $60,000 $140,000

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 following information relates to three possible capital expenditure projects. Because of capital rationing only one project can be accepted. Project A Project B Project C Initial Cost 240,000.00 260,000.00 200,000.00 Expected life 5 5 4 Scrap value expected 10,000.00 15,000.00 10,000.00 Expected Cash Inflows: End Year 1 85,000.00 95,000.00 45,000.00 End Year 2 70,000.00 70,000.00 65,000.00 End Year 3 65,000.00 55,000.00 95,000.00 End Year 4 60,000.00 50,000.00 100,000.00 End Year 5 50,000.00 50,000.00 The company estimates cost of capital is 18%. The table below shows the present value of $1 at 14%, 18% and 22%. Periods 14% 18% 22% 1 0.877 0.847 0.820 2 0.769 0.718 0.672 3 0.675 0.609 0.551 4 0.592 0.516 0.451 5 0.519 0.437 0.370 6 0.456 0.370 0.303 Required: Calculate:(b) The accounting rate of return for each…
Given the following project alternatives, determine the most economical investment given an MARR of 10% using IRR method. Project A B C D 6.12% -2.8067% -3.394% 2699% Investment 13.69% $ 100,000 $ Annual Profit Useful Life Salvage Value $ 140,500 $ 148,200 $ 27,500 38,600 38,500 $ 98,000 $ 22,100 What is the incremental IRR of the second comparison? 5 5 5 5 $ 10,000 $ $ 14,000 25,600 14,000
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Information on four investment proposals is given below: Investment Proposal A B C D Investment required $ (330,000) $ (40,000) $ (190,000) $ (2,380,000) Present value of cash inflows 480,000 56,500 286,700 3,178,500 Net present value $ 150,000 $ 16,500 $ 96,700 $ 798,500 Life of the project 5 years 7 years 6 years 6 years Required: 1. Compute the profitability index for each investment proposal. (Round your answers to 2 decimal places.) 2. Rank the proposals in terms of preference.
Figure 2 shows the payments and revenues of a small project. If M.R.R.R= %15, Evaluate the project economically using A.W method $5,000 $5,000 $5,000 $5,000 $5,000 $5,000 $5,000 $3,000 $500 $20,000 $1,000 $1,500 $2,000 M 6 $2,500 $3,000 $3,500 Figure 2
INFORMATION The management of Mastiff Enterprises has a choice between two projects viz. Project Cos and Project Tan, each of which requires an initial investment of R2 500 000. The following information is presented to you: PROJECT TAN 5.1 5.2 5.3 Year 5.4 1 5.5 2 3 5 PROJECT COS Net Profit R 130 000 130 000 130 000 130 000 130 000 Net Profit R 80 000 A scrap value of R100 000 is expected for Project Tan only. The required rate of return is 15%. Depreciation is calculated using the straight-line method. 180 000 Use the information provided above to calculate the following. Where applicable, use the present value tables provided in APPENDICES 1 and 2 that appear after QUESTION 5. 120 000 220 000 50 000 Payback Period of Project Tan (expressed in years, months and days). Net Present Value of Project Tan. Accounting Rate of Return on average investment of Project Tan (expressed to two decimal places). Benefit Cost Ratio of Project Cos (expressed to three decimal places). Internal Rate of…
find FW of Alt. A find FW of Alt. B find FW of Alt. C find FW of Alt. D
Question: Altro Corporation is considering the following three investment projects: Project R Project S Project T Investment required $33,000 Present value of cash inflows $33,333 Required: $40,000 $46,800 $97,000 $112,520 Rank the projects according to the profitability index, from most profitable to least profitable. (Ignore income taxes in this problem)
Compute the IRR statistic for Project E. The appropriate cost of capital is 7 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 −$3,600 $1,110 $1,050 $900 $680 $480 Should the project be accepted or rejected?multiple choice rejected accepted
nformation on four investment proposals is given below: Investment Proposal A B C D Investment required $ (900,000) $ (170,000) $ (90,000) $ (1,430,000) Present value of cash inflows 1,263,600 233,400 136,500 1,908,300 Net present value $ 363,600 $ 63,400 $ 46,500 $ 478,300 Life of the project 5 years 7 years 6 years 6 years Required: 1. Compute the profitability index for each investment proposal. (Round your answers to 2 decimal places.) 2. Rank the proposals in terms of preference.
Assume that a company is considering a $2,400,000 capital investment in a project that would earn net income for each of the next five years as follows: Sales Variable expenses Contribution margin $ 1,900,000 800,000 1,100,000 12:46 Fixed expenses: Out-of-pocket operating costs. $ 300,000 Depreciation 400,000 700,000 Net operating income $ 400,000 Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using the tables provided. If the company's discount rate is 21%, then the project's net present value is closest to

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