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Which of the following statements is (are) true about NPV as an investment valuation method:
(i) NPV should be used when capital is not rationed.
(ii) NPV is only useful if the cash flows are positive.
(iii) NPV measures the extra value investors would receive when accepting a project.
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- An investor has $24,000 to invest in bonds of AAA and B qualities. The AAA bonds yield an average of 6% and the B bonds yield 10%. The investor requires that at least three times as much money should be invested in AAA bonds as in B bonds. How much should be invested in each type of bond to maximize the return? What is the maximum return? Define the variables needed to solve this problem. Organize your given information. (This part NOT graded, but encouraged.) Write the complete linear programming problem, which includes the objective function and all constraints. Graph and make sure all lines are labeled and shaded/solution region is clear and easy to identify. Create a corner point chart. Remember to mark your solution. Answer in a complete sentence or two: How much should be invested in each type of bond to maximize the return? What is the maximum return?Cost-benefit analysis is used to determine the desirability of investing in a project (such as a dam, factory, or public park) by figuring whether its present and future economic benefits outweigh its present and future economic costs. True FalseWhat rent PSF would be needed to incentivize this development? Suppose new Class A Office developments cost $200 per square foot (psf), all in (i.e. land cost, construction, dev costs, reasonable dev profits) If the new building can be sold for $200 psf, development is feasible. Suppose investors are willing to pay $12.50 per dollar of (net operating) income on the building
- I was told that the NPV alpha and IRR alpha is correct. but I was also told that project alpha has a higher internal rate of return and higher and present value. Is there many mistakes, within the workout?What significant disadvantages does the widely employed payback technique of investment have?A building manager needs to replace an air condenser and is considering two models. One of the models is more energy efficient and is expected to yield savings of around $110 per year over the next three years but it costs $349 more. If the firm uses an opportunity cost of 12% for investment decisions. What is the NPV of buying the more energy efficient model (rounded to the nearest dollar)?
- Your employer is trying to select from a list of possible capital projects. The projects, along with their cost and benefits, are listed below. The capital budget available is $1 million. In addition to spending constraints, your employer would like to select at least 2 projects. Projects 4 and 1 cannot both be selected together. Formulate the problem as a linear program and determine the optimal solution. Project Cost Net Present Value $260, 000 $290, 000 1 $750,000 2 $740.000 3 $225,000 $550,000 4 $260,000 $760,000 $300,000 $780,000 Which projects should be selected? Project 1 will Project 2 will Project 3 will Project 4 will Project 5 will What is the total net present value of these projects? Total net present valueB-2. A firm must decide whether to construct a small, medium or large stamping plant. A consultant’s report indicates a 0.20 probability that demand will be low and 0.80 that demand will be high. If the firm builds a small facility and demand turns out to be low, the Net Present Value (NPV) will be $42M. If demand turns out to be high, the firm can either subcontract and realize the NPV of $42M or expand greatly for a Net Present Value of $48M. The firm could build a medium size facility as a hedge: if demand turns out to be low, its NPV is estimated at $22M; if demand turns out to be high, the firm could do nothing and realize a NPV of $46M, or could expand and realize a NPV of $50M. If the firm builds a large facility and demand is low, the NPV will be ($20M), whereas high demand will result in a NPV of $72M. Analyze and solve this problem using a decision tree What is the Maximin Alternative and c) Compute the…True or False AFC=ATC+AVC
- Which of the following would not be on the statement of cash flows? Group of answer choices Cash flows from investing activities. Cash flows from financing activities. Cash flows from operating activities. Cash flows from contingent activities.The Rosebud Motel is a must-stay for any road-tripper or weary traveler. The motel fils each of its 24 rooms for 200 nights each during the year. Annual fixed costs total $160,000. The variable cost of one night's stay is $100. The motel owners expect a 50% return on the company's $500,000 of assets each year. The Rosebud Motel is currently the only place to stay for 50 miles. What should Rosebud's cost-plus price be if sales volume and costs are expected to stay consistent? OA. $133.33 OB. $185.42 OC. $2,150.00 OD. $152.08 OE. The Rosebud Motel would not set its price as it is a price-taker in this market.A company produces and sells luxury goods and is able to control the demand for the product by varying the selling price. The relationship between price and demand is found to be: p=10-(42/D^2)+2Dwhere p is the price per unit in million dollars and D is the demand per year. The company is seeking to maximize its profit. The fixed cost is $59 million per year and the variable cost is $25 million per unit. The production capacity is 42 units per year, and the company produces at least 1 unit per month.a) Derive how to find the number of units that should be produced annually to maximize profit.b) What is the maximum profit per year?c) What is the annual breakeven point?d)What is the company’s range of profitable output per year?