To make capital budgeting decision, it is required that the asset and or projects are properly evaluated. This is done as follows: Estimated the cash flows which is expected to be generated from the project or asset Evaluate the riskiness of the project and determine an appropriate discount rate specific for the project Determine the present value of all the expected cash flows, this is done by using the below equation PV of CF = C F ^ 1 ( 1 + r ) 1 + C F ^ 2 ( 1 + r ) 2 + ....... + C F n ^ ( 1 + r ) n = ∑ t = 1 n C F t ^ ( 1 + r ) t Here, Expected net cash flow in Period t is “ C F t ^ ” Required rate of return is “ r ” Now, compare the present value of future expected cash flows with the cost of the project. If the present value of cash inflows is higher than the present value of the cost of the asset or project, the project shall be accepted, as it would generate profit. A company is expected to generate $36,950 per year for the next six years. The required rate of return is 10%.

Question

Want to see more full solutions like this?

Answer 1

Question

Chapter 9, Problem 1PROB

Summary Introduction

To make capital budgeting decision, it is required that the asset and or projects are properly evaluated. This is done as follows:

Estimated the cash flows which is expected to be generated from the project or asset

Evaluate the riskiness of the project and determine an appropriate discount rate specific for the project

Determine the present value of all the expected cash flows, this is done by using the below equation

PV of CF=CF^1(1+r)1+CF^2(1+r)2+.......+CFn^(1+r)n=∑t=1nCFt^(1+r)t

Here,

Expected net cash flow in Period t is “CFt^”

Required rate of return is “r”

Now, compare the present value of future expected cash flows with the cost of the project. If the present value of cash inflows is higher than the present value of the cost of the asset or project, the project shall be accepted, as it would generate profit.

A company is expected to generate $36,950 per year for the next six years. The required rate of return is 10%.

Expert Solution & Answer

Explanation of Solution

Present value of the cash flows of $36,950 for 6 years at 10% can be calculated using present value annuity formula as below:

PV of CF=CF×[1−(1+r)−nr] =$36,950×[1−(1+0.10)−60.10] =$36,950×[1−0.5644739300537770.10] =$36,950×0.4355260699462230.10 =$160,926.882845129 or $160,926.88

Therefore, the value of the project would be $160,926.88.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Students have asked these similar questions

You just bought a new car for $X. To pay for it, you took out a loan that requires regular monthly payments of $1,640 for 27 months and a special payment of $25,200 in 6 months. The interest rate on the loan is 1.27 percent per month and the first regular payment will be made in 1 month. What is X? Input instructions: Round your answer to the nearest dollar. 59 $

How much do you need in your account today if you expect to make quarterly withdrawals of $8,900 for 7 years and also make a special withdrawal of $34,500 in 7 years. The expected return for the account is 3.28 percent per quarter and the first regular withdrawal will be made in 3 months. Input instructions: Round your answer to the nearest dollar. $

Please don't use Ai solution

Answer 2

Question

Chapter 9, Problem 1PROB

Summary Introduction

To make capital budgeting decision, it is required that the asset and or projects are properly evaluated. This is done as follows:

Estimated the cash flows which is expected to be generated from the project or asset

Evaluate the riskiness of the project and determine an appropriate discount rate specific for the project

Determine the present value of all the expected cash flows, this is done by using the below equation

PV of CF=CF^1(1+r)1+CF^2(1+r)2+.......+CFn^(1+r)n=∑t=1nCFt^(1+r)t

Here,

Expected net cash flow in Period t is “CFt^”

Required rate of return is “r”

Now, compare the present value of future expected cash flows with the cost of the project. If the present value of cash inflows is higher than the present value of the cost of the asset or project, the project shall be accepted, as it would generate profit.

A company is expected to generate $36,950 per year for the next six years. The required rate of return is 10%.

Expert Solution & Answer

Explanation of Solution

Present value of the cash flows of $36,950 for 6 years at 10% can be calculated using present value annuity formula as below:

PV of CF=CF×[1−(1+r)−nr] =$36,950×[1−(1+0.10)−60.10] =$36,950×[1−0.5644739300537770.10] =$36,950×0.4355260699462230.10 =$160,926.882845129 or $160,926.88

Therefore, the value of the project would be $160,926.88.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 3

Question

Chapter 9, Problem 1PROB

Summary Introduction

To make capital budgeting decision, it is required that the asset and or projects are properly evaluated. This is done as follows:

Estimated the cash flows which is expected to be generated from the project or asset

Evaluate the riskiness of the project and determine an appropriate discount rate specific for the project

Determine the present value of all the expected cash flows, this is done by using the below equation

PV of CF=CF^1(1+r)1+CF^2(1+r)2+.......+CFn^(1+r)n=∑t=1nCFt^(1+r)t

Here,

Expected net cash flow in Period t is “CFt^”

Required rate of return is “r”

Now, compare the present value of future expected cash flows with the cost of the project. If the present value of cash inflows is higher than the present value of the cost of the asset or project, the project shall be accepted, as it would generate profit.

A company is expected to generate $36,950 per year for the next six years. The required rate of return is 10%.

Expert Solution & Answer

Explanation of Solution

Present value of the cash flows of $36,950 for 6 years at 10% can be calculated using present value annuity formula as below:

PV of CF=CF×[1−(1+r)−nr] =$36,950×[1−(1+0.10)−60.10] =$36,950×[1−0.5644739300537770.10] =$36,950×0.4355260699462230.10 =$160,926.882845129 or $160,926.88

Therefore, the value of the project would be $160,926.88.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 4

Question

Chapter 9, Problem 1PROB

Summary Introduction

To make capital budgeting decision, it is required that the asset and or projects are properly evaluated. This is done as follows:

Estimated the cash flows which is expected to be generated from the project or asset

Evaluate the riskiness of the project and determine an appropriate discount rate specific for the project

Determine the present value of all the expected cash flows, this is done by using the below equation

PV of CF=CF^1(1+r)1+CF^2(1+r)2+.......+CFn^(1+r)n=∑t=1nCFt^(1+r)t

Here,

Expected net cash flow in Period t is “CFt^”

Required rate of return is “r”

Now, compare the present value of future expected cash flows with the cost of the project. If the present value of cash inflows is higher than the present value of the cost of the asset or project, the project shall be accepted, as it would generate profit.

A company is expected to generate $36,950 per year for the next six years. The required rate of return is 10%.

Expert Solution & Answer

Explanation of Solution

Present value of the cash flows of $36,950 for 6 years at 10% can be calculated using present value annuity formula as below:

PV of CF=CF×[1−(1+r)−nr] =$36,950×[1−(1+0.10)−60.10] =$36,950×[1−0.5644739300537770.10] =$36,950×0.4355260699462230.10 =$160,926.882845129 or $160,926.88

Therefore, the value of the project would be $160,926.88.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 9, Problem 1PROB

Summary Introduction

To make capital budgeting decision, it is required that the asset and or projects are properly evaluated. This is done as follows:

Estimated the cash flows which is expected to be generated from the project or asset

Evaluate the riskiness of the project and determine an appropriate discount rate specific for the project

Determine the present value of all the expected cash flows, this is done by using the below equation

PV of CF=CF^1(1+r)1+CF^2(1+r)2+.......+CFn^(1+r)n=∑t=1nCFt^(1+r)t

Here,

Expected net cash flow in Period t is “CFt^”

Required rate of return is “r”

Now, compare the present value of future expected cash flows with the cost of the project. If the present value of cash inflows is higher than the present value of the cost of the asset or project, the project shall be accepted, as it would generate profit.

A company is expected to generate $36,950 per year for the next six years. The required rate of return is 10%.

Expert Solution & Answer

Explanation of Solution

Present value of the cash flows of $36,950 for 6 years at 10% can be calculated using present value annuity formula as below:

PV of CF=CF×[1−(1+r)−nr] =$36,950×[1−(1+0.10)−60.10] =$36,950×[1−0.5644739300537770.10] =$36,950×0.4355260699462230.10 =$160,926.882845129 or $160,926.88

Therefore, the value of the project would be $160,926.88.

Answer 6

Chapter 9, Problem 1PROB

Summary Introduction

To make capital budgeting decision, it is required that the asset and or projects are properly evaluated. This is done as follows:

Estimated the cash flows which is expected to be generated from the project or asset

Evaluate the riskiness of the project and determine an appropriate discount rate specific for the project

Determine the present value of all the expected cash flows, this is done by using the below equation

PV of CF=CF^1(1+r)1+CF^2(1+r)2+.......+CFn^(1+r)n=∑t=1nCFt^(1+r)t

Here,

Expected net cash flow in Period t is “CFt^”

Required rate of return is “r”

Now, compare the present value of future expected cash flows with the cost of the project. If the present value of cash inflows is higher than the present value of the cost of the asset or project, the project shall be accepted, as it would generate profit.

A company is expected to generate $36,950 per year for the next six years. The required rate of return is 10%.

Expert Solution & Answer

Explanation of Solution

Present value of the cash flows of $36,950 for 6 years at 10% can be calculated using present value annuity formula as below:

PV of CF=CF×[1−(1+r)−nr] =$36,950×[1−(1+0.10)−60.10] =$36,950×[1−0.5644739300537770.10] =$36,950×0.4355260699462230.10 =$160,926.882845129 or $160,926.88

Therefore, the value of the project would be $160,926.88.

Answer 7

Chapter 9, Problem 1PROB

Summary Introduction

To make capital budgeting decision, it is required that the asset and or projects are properly evaluated. This is done as follows:

Estimated the cash flows which is expected to be generated from the project or asset

Evaluate the riskiness of the project and determine an appropriate discount rate specific for the project

Determine the present value of all the expected cash flows, this is done by using the below equation

PV of CF=CF^1(1+r)1+CF^2(1+r)2+.......+CFn^(1+r)n=∑t=1nCFt^(1+r)t

Here,

Expected net cash flow in Period t is “CFt^”

Required rate of return is “r”

Now, compare the present value of future expected cash flows with the cost of the project. If the present value of cash inflows is higher than the present value of the cost of the asset or project, the project shall be accepted, as it would generate profit.

A company is expected to generate $36,950 per year for the next six years. The required rate of return is 10%.

Answer 8

Expert Solution & Answer

Explanation of Solution

Present value of the cash flows of $36,950 for 6 years at 10% can be calculated using present value annuity formula as below:

PV of CF=CF×[1−(1+r)−nr] =$36,950×[1−(1+0.10)−60.10] =$36,950×[1−0.5644739300537770.10] =$36,950×0.4355260699462230.10 =$160,926.882845129 or $160,926.88