Sub part (a)
To determine: Time line.
Introduction:
Time line: A time line in business is a visual representation of a sequence of events or it is a length of time that a project is expected to take.
Sub part (b)
To determine:
Introduction:
Time line: A time line in business is a visual representation of a sequence of events or it is a length of time that a project is expected to take.
Future value: The future value refers the value of present amount at a future date.
Sub part (c)
To determine: Present value in time line.
Introduction:
Time line: A time line in business is a visual representation of a sequence of events or it is a length of time that a project is expected to take.
Present value: The present value refers to the today’s value of a future amount.
Sub part (d)
To discuss: importance of present value and future value in decision making.
Introduction:
Present value: The present value refers to the today’s value of a future amount.
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Gitman: Principl Manageri Finance_15 (15th Edition) (What's New in Finance)
- Question content area top Part 1 (IRR calculation) Determine the IRR on the following projects: a. An initial outlay of $13,000 resulting in a single free cash flow of $17,165 after 9 years b. An initial outlay of $13,000 resulting in a single free cash flow of $46,394 after 15 years c. An initial outlay of $13,000 resulting in a single free cash flow of $105,001after 25 years d. An initial outlay of $13,000 resulting in a single free cash flow of $13,653 after 4 yearsarrow_forwardProblem 04: Investor Doe has $10,000 to invest in four projects. The following table gives the cash flow for the four investments Project 1 2 Year 1 -1.00 -1.00 0.00 -1.00 Cash flow ($1000) at the start of Year 2 Year 3 Year 4 0.30 0.20 0.80 0.60 0.50 0.60 -1.00 0.40 1.80 1.50 1.90 1.80 Year 5 1.20 1.30 0.80 0.95 The information in the table can be interpreted as follows: For project 1, $1.00 invested at the start of year 1 will yield $.50 at the start of year 2, $.30 at the start of year 3, $1.80 at the start of year 4, and $1.20 at the start of year 5.The remaining entries can be interpreted similarly. The entry 0.00 indicates that no transaction is taking place. Doe has the additional option of investing in a bank account that earns 6.5% annually. All funds accumulated at the end of 1 year can be reinvested in the following year. Formulate the problem as a linear program to determine the optimal allocation of funds to investment opportunities.arrow_forwardDiscount Rate 12% Investment Project Cash Flow Total Net Cash Flow Initial Investment $ (8,000) ? Year 1 $ 800 ? Year 2 $ 900 ? Year 3 $ 1,500 ? Year 4 $ 1,800 ? Year 5 $ 3,200 NPV of investment $ ? Estimated Payback Period ? Estimate the total net cash flows, NPV of Investment and Estimated Payback Period using the excel's formula.arrow_forward
- 10:17 W W n s26-3 S26-4 Using the payback and accounting rate of return methods to make capital investment decisions Learning Objective 2 ::: Consider how Hunter Valley Snow Park Lodge could use capital budgeting to decide whether the $11,000,000 Snow Park Lodge expansion would be a good investment. Assume Hunter Valley's managers developed the following estimates concerning the expansion: Number of additional skiers per day Average number of days per year that weather conditions allow skiing at Hunter Valley Useful life of expansion (in years) Average cash spent by each skier per day Average variable cost of serving each skier per day Cost of expansion C 056ll 70% QAA 1465/ 1480 | b 121 skiers 142 days 7 years $ 241 83 11,000,000 ||| 0 < Xarrow_forwardQuestion list ✔Question 1 Data table A 1 2 Projected cash outflow 3 Net initial investment 4 Projected cash inflows 5 Year 1 6 Year 2 7 Year 3 8 Year 4 9 Required rate of return ↑ Lulus Construction is analyzing its capital expenditure proposals for the purchase of equipment in the coming year. The capital budget is limited to $12,000,000 for the year. Lyssa Bickerson, staff analyst at Lulus, is preparing an analysis of the three projects under consideration by Caden Lulus, the company's owner. (Click the icon to view the data for the three projects.) Present Value of $1 table Read the requirements. B Project A с Project B Present Value of Annuity of $1 table Future Value of $1 table Future Value of Annuity of $1 table D Project C $ 6,000,000 $ 4,000,000 $8,000,000 8% $ 2,050,000 $ 1,100,000 $4,700,000 2,050,000 2,300,000 4,700,000 2,050,000 700,000 50,000 2,050,000 25,000 8% 8% Requirements 1. Because the company's cash is limited, Lulus thinks the payback method should be used to…arrow_forwardQUESTION 2 You expect to receive $100 in year 1, $150 in year 2, and $200 in year 3 if you invest in Project XYZ. The project requires you to make an initial investment of $150 in year 0. You also expect to incur the following expenses: $80 in year 1, $80 in year 2, $100 in year 3. Suppose the current discount rate is 10% and remain the same. Suppoe all cash flows are incurred at the end of each year. What is the dynamic payback period? (round to 2nd decimal place)arrow_forward
- Problem 6 - Shirt Corporation is considering purchasing equipment that costs $60,000 and is expected to provide the following cash inflows over its five-year useful life: Year Cash Inflow 1 $18,000 2 $22,000 3 $24,000 4 $16,000 5 $ 9,000 Calculate the payback period for this investment.arrow_forwardStudent question Assume a project costs $225,000 to implement and has annual net cash inflows of $50,000 for a period of eight years, a required rate of return of 11 percent, and an inflation rate of 3 percent. Calculate its net present value..arrow_forwardQuestion 6 A project has expected cash inflows, starting with year 1, of $2,200, $2,900, $3,500 and finally in year four, $4,000. The profitability index is 1.14 and the discount rate is 12 percent. What is the initial cost of the project? Group of answer choices $9,211.06 $9,250.00 $8,166.19 $7,899.16 $8,098.24arrow_forward
- S26-9 Determining present value Learning Objective 3 Use the Present Value of $1 table (Appendix A, Table A-1) to determine the present value of $1 received one year from now. Assume a 8% interest rate. Use the same table to find the present value of $1 received two years from now. Continue this process for a total of five years. Round to three decimal places. Requirements 1. What is the total present value of the cash flows received over the five- year period? 2. Could you characterize this stream of cash flows as an annuity? Why or why not? 3. Use the Present Value of Ordinary Annuity of $1 table (Appendix A, Table A-2) to determine the present value of the same stream of cash flows. Compare your results to your answer to Requirement 1. 4. Explain your findings.arrow_forwardConsider the following two projects: Project Year 0 Year 1 Cash Flow Cash Flow A B - 100 -73 40 30 OA. 2.7 years OB. 2 years OC. 2.3 years D. 2.5 years Year 2 Cash Flow 50 30 The payback period for project A is closest to Year 3 Cash Flow 40 30 *** Year 4 Cash Flow N/A 30 Discount Rate 0.1 0.1arrow_forwardYou invest $200 000 in a project. Your returns are as follows: Year Annual Net Cash Inflow Cumulative Net Cash Inflow 1 $70 000 $70 000 2 $70 000 $140 000 3 $80 000 $220 000 4 $50 000 $270 000 5 $30 000 $300 000 Calculate your payback period? a. 4 years b. 3.5 years c. 2.25 years d. 2.75arrow_forward
- Survey of Accounting (Accounting I)AccountingISBN:9781305961883Author:Carl WarrenPublisher:Cengage Learning