Your company has a well that needs some work to resume production. The work will cost $550,000. After the work is complete, the well is expected to produce the annual oil production shown in the following table. Your WI is 80% and your NRI is 68%. Operating costs are estimated to be $35,000 per year. Assume a constant oil price of $85/Bbl. Calculate total net cash flow (BFIT) for this investment. Year 1 2 3 8/8ths Production, Bbl 5000 4200 3600 Answer: 2 Would you rather own (A) WI = 80 %, NRI = 64% or (B) WI = 40 %, NRI = 34% ? WHY? 3 You are going to invest $30,000. Your goal is to double your investment in 10 years. At approximately what interest rate do you need to invest?

Your company has a well that needs some work to resume production. The work will cost $550,000. After the work is complete, the well is expected to produce the annual oil production shown in the following table. Your WI is 80% and your NRI is 68%. Operating costs are estimated to be $35,000 per year. Assume a constant oil price of $85/Bbl. Calculate total net cash flow (BFIT) for this investment. Year 1 2 3 8/8ths Production, Bbl 5000 4200 3600 Answer: 2 Would you rather own (A) WI = 80 %, NRI = 64% or (B) WI = 40 %, NRI = 34% ? WHY? 3 You are going to invest $30,000. Your goal is to double your investment in 10 years. At approximately what interest rate do you need to invest?

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 evaluating an investment project, which has a cost of $161,000 today and is expected to provide after-tax annual cash flows of $20,000 for seven years. In order to compute the MIRR, you are modifying the cash flows. Assuming the cost of capital is 9.1 percent, what is the terminal cash flow of the modified cash flows? Question 12 options: $173,074 $176,474 $178,474 $180,974 $182,874 $184,574
You are considering building a new facility. It will cost $98.8 million upfront. After that, it is expected to produce profits of $29.3 million at the end of every year. The cash flows are expected to last forever. Calculate the NPV of this investment opportunity if your cost of capital is 8.9%. Calculate the IRR. Question content area bottom Part 1 The NPV of this investment opportunity is $enter your response here million. (Round to one decimal place.) The IRR of the project is enter your response here%.
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calculate the net present value of the following: Project A requires an initial investment of $1,000 and is expected to generate cash flows of $400 per year for 3 years
You are considering opening a new plant. The plant will cost $98.6 million upfront. After that, it is expected to produce profits of $29.9 million at the end of every year. The cash flows are expected to last forever. Calculate the NPV of this investment opportunity if your cost of capital is 8.1%. 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.
Snowflake Resorts is considering investing in a project that has a net investment of $240,000. This project will return positive net cash flows annually for the next 5 years of $80,000 per year. Snowflake Resorts requires a 12% return on all of its investments. The payback period of this investment is ________ years 5 3 4 2 The net present value of this project is $65,355 $48,384 $85,652 $57,635 The profitability index of this project is 2016 5924 7350 3852 When projects have scale differences, only the Net Present Value method will rank the projects correctly True False Fees paid to investment bankers and lawyers for issuing securities are called Component costs Issuance costs Security costs Licensing costs Purposes for considering a capital project may include which of the following Cost reductions Growth projects Government required projects All of the above When the weighted average cost of capital for a project is considered on an after tax…
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Use the NPV method to determine whether Kyler Products should invest in the following projects: Project A: Costs $280,000 and offers seven annual net cash inflows of $52,000. Kyler Products requires an annual return of 12% on investments of this nature. Project B: Costs $385,000 and offers 9 annual net cash inflows of $75,000. Kyler Products demands an annual return of 10% on investments of this nature. (Click the icon to view Present Value of $1 table.) (Click the icon to view Present Value of Ordinary Annuity of $1 table.) Read the requirements. Project B: Years 1-9 0 Project A Project B Present value of annuity Investment Net present value of Project B Requirement 2. What is the maximum acceptable price to pay for each project? Maximum Project A Project B Net Cash Inflow Acceptable Price Annuity PV Factor (i=10%, n=9) Requirement 3. What is the profitability index of each project? (Round to two decimal places, X.XX.) Select the formula, then enter the amounts to calculate the…

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