You are trying to value the following project for your company. You know that the project will generate free cash flows in perpetuity that will grow at a constant annual rate of 1.5% after year 3. The applicable interest rate for this project is 7.5%. What is the NPV of this project? Express your result in $-millions and round to two decimals (do not include the $-symbol in your answer). If you calculate a negative NPV enter a negative number. Year Free Cash Flows Free Cash Flow Forecasts (in $-millions) 0 -130 Year 1 -1 2 24 3 37

You are trying to value the following project for your company. You know that the project will generate free cash flows in perpetuity that will grow at a constant annual rate of 1.5% after year 3. The applicable interest rate for this project is 7.5%. What is the NPV of this project? Express your result in $-millions and round to two decimals (do not include the $-symbol in your answer). If you calculate a negative NPV enter a negative number. Year Free Cash Flows Free Cash Flow Forecasts (in $-millions) 0 -130 Year 1 -1 2 24 3 37

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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You are considering opening a new plant. The plant will cost $95.1 million upfront and will take one year to build. After that, it is expected to produce profits of $29.2 million at the end of every year of production. The cash flows are expected to last forever. Calculate the NPV of this investment opportunity if your cost of capital is 7.4 %. Should you make the investment? Calculate the IRR. Does the IRR rule agree with the NPV rule?
Mansukhbhai
Suppose your firm is considering investing in a project with the cash flows shown below, that the required rate of return on projects of this risk class is 9 percent, and that the maximum allowable payback and discounted payback statistics for the project are 3.5 and 4.5 years, respectively. Time: Cash flow: 0 -$15, 200 MIRR 1 $3,000 3 2 $4,200 $3,400 Use the MIRR decision rule to evaluate this project. (Do not round intermediate calculations and round your final answer to 2 decimal places.) % 5 $3,400 $3,200 6 $3,000
Please answer the following questions using the information below: NPV. Using a 10% required rate of return, calculate the NPV for this project. Should it be accepted or rejected? PI. Calculate the Profitability Index (PI) for this project. Should it be accepted or rejected? Consider the following cash flows: Year 0 1 2 3 4 5 6 Cash Flow -$8,000 $3,000 $3,600 $2,700 $2,500 $2,100 $1,600 Payback. The company requires all projects to payback within 3 years. Calculate the payback period. Should it be accepted or rejected? Discounted Payback. Calculate the discounted payback using a discount rate of 10%. Should it be accepted or rejected? IRR. Calculate the IRR for this project. The company’s required rate of return is 10%. Should it be accepted or rejected? NPV. Using a 10% required rate of return, calculate the NPV for this project. Should it be accepted or rejected? PI. Calculate the Profitability Index (PI) for this project. Should it be accepted or rejected?…
You are considering opening a new plant. The plant will cost $96.2 million upfront and will take one year to build. After that, it is expected to produce profits of $30.2 million at the end of every year of production. The cash flows are expected to last forever. Calculate the NPV of this investment opportunity if your cost of capital is 8.2%. Should you make the investment? Calculate the IRR. Does the IRR rule agree with the NPV rule? Here is the cash flow timeline for this problem: Years Cash Flow ($ million) 0 -96.2 1 2 + 30.2 3 30.2 4 30.2 Forever 30.2
You are considering opening a new plant. The plant will cost $95.1 million up front and will take one year to build. After that it is expected to produce profits of $31.8 million at the end of every year of production. The cash flows are expected to last forever. Calculate the NPV of this investment opportunity if your cost of capital is 7.6%. Should you make the investment? Calculate the IRR and use it to determine the maximum deviation allowable in the cost of capital estimate to leave the decision unchanged. The NPV of the project will be $ million. (Round to one decimal place.)
Television is considering a project with an initial outlay of $X (you will have to determine this amount). It is expected that the project will produce a positive cash flow of $54,000 a year at the end of each year for the next 13 years. The appropriate discount rate for this project is 8 percent. If the project has an internal rate of return of 13 percent, what is the project's net present value? *** a. If the project has an internal rate of return of 13%, then the project's initial outlay is $ the nearest cent.) (Round to
Pendleton Products has a project requiring an initial cash investment of $3,400. The project is expected to return $1,100 each period for the next 5 periods, and it has a discount rate of 6%.1. Determine how long it will take, if at all, for the project to have a positive payback.Present value formula:
You are considering the purchase of an investment that would pay you $5,000 per year for Years 1-5, $3,000 per year for Years 6-8, and $2,000 per year for Years 9 and 10. If you require a 14%, and the cash flows occur at the end of each year, what is the modified internal rate of return if the initial outlay is $10,000 and the cash flows are reinvested at the required rate of return? 14% 23% 28% 46%
You are considering opening a new plant. The plant will cost $104.8 million upfront and will take one year to build. After that, it is expected to produce profits of $28.2 million at the end of every year of production. The cash flows are expected to last forever. Calculate the NPV of this investment opportunity if your cost of capital is 7.8%. Should you make the investment? Calculate the IRR. Does the IRR rule agree with the NPV rule?
c) Consider this question: XYZ Company can borrow money at an interest rate of 10% (that's their Cost of Capital). They have an opportunity to invest in a project that will generate returns (Free Cash Flows) over the next three years. One year from now, the project will generate $80,000 in FCF, two years from now the project will generate $90,000 in FCF, and three years from now the project will generate $100,000 in FCF. The project will require an investment of $230,000. Is it worth doing? Time 1 year from now 2 years from now 3 years from now Free Cash Flow $ $ Cost of Capital 10% 80,000 90,000 100,000
The table below shows actual cash flows of a project for XYZ LLC. If the real interest rate is 5% and inflation rate is 3%, calculate the Constant Dollar NPW for the project. Should the project be funded based on the NPW calculated? ΕΟΥ Cash Flow -$60,000 1 $25,000 2 $23,000 3 $21,000 Question 6 Part C: Provide the Constant Dollar NPW for this project. Enter your answer in the form: 1234.56

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