1. A project earns $10,000 a year for five years. The present total value of the project is (using a discount rate of 5.75%): 2. a) $50,000 b) more than $50,000 c) less than $50,000 The NPV of a project is $1,012, using a discount rate of 9.75% p.a. The rate of return on this project is: a. 9.75% b. more than 9.75% c. less than 9.75%
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- 4. If the project's cost of capital is 12%, what is the NPV of the project? $ 209,845 I'm still trying to figure out this last part. The homework says this is wrong, but I cannot follow your work to see if there is just an error in the decimals. Please explain how you got this last part.Question 7 A project involves an immediate expenditure of $2 000, and will require additional expenditures of $150 a year for the next ten years, starting one year from now. After ten years it yields an income of $8 000, but a year later a further expenditure of $1 000 will be required to close down the project. What is its rate of return? 9% 10% 11% 12% 13% Save8. Consider a project with the following cash flows: Co =-€100, C₁ =€200, C2 =-€75. a. How many internal rates of return does this project have? b. Which of the following numbers is the project IRR: (i) -50%; (ii) -12%; (iii) 5%; (iv) 50%? c. The opportunity cost of capital is 20%. Is this an attractive project?
- What process does the net present value method use to help management determine whether a project is acceptable to a company? Options : A. It discounts net cash flows to their present value and then compares that value to the capital outlay required by the project.B. It determines the interest rate that will cause the present value of the capital expenditure to equal the present value of the expected net cash flows.C. It divides the present value of net cash flows by the initial investment to determine the profitability index of the project.D. It identifies the time period required to recover the cost of the capital investment from the net annual cash flow produced by the project.NPV Calculate the net present value (NPV) for the following 12-year projects. on the acceptability of each. Assume that the firm has a cost of capital of 7%. a. Initial investment is $1,000,000; cash inflows are $ 160,000 per Year b. Initial investment is $2,500,000; cash inflows are $320,000 per Year Using Excel to answer. Show all FormulasDefine IRR method of capital budgeting. What are some of the problems associated with using IRR approach for mutually exclusive projects? Briefly explain with examples. How do managers deal with those problems?
- 5. Assume the annualized rental rate on capital is 7.4 percent, A = 30, a in the model last 30 years. The value of rental rate over one period of the model is 1/3 and each period a. 0.0000 b. 1.5353 c. 7.5139 d. 23.0723A project that will provde annual cash flows of $2,350 for nine years costs $9,700 today. a. At a required return of 12 percent, what is the NPV of the project? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. At a required return of 28 percent, what is the NPV of the project? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. At what discount rate would you be indifferent between accepting the project and rejecting it? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) а. NPV b. NPV C. Discount rate %4. A company invests $2000 in a project over five years. At the end of every year, for the first three years the project generates $500. At the end of the fourth year the project generates no money. At the end of the fifth year, the project is terminated. How much must the project generate at the end of the fifth year to realize a 13% return on the initial investment ? a) X$1520
- 47) What is a greenfield investment? A) a brand-new investment B) a corporate shift toward a "greener" str C) a joint venture with a firm that is recog D) an overall shift in attitude towards less Answer: AYou are a consultant to a large manufacturing corporation that is considering a project with the following net after-tax cash flows (in millions of dollars): Years from Now 0 1-10 After-Tax Cash Flow -85 19 The project's beta is 1.2. Required: a. Assuming that rf= 7% and E(TM) = 11%, what is the net present value of the project? Note: Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places. b. What is the highest possible beta estimate for the project before its NPV becomes negative? Note: Round your answer to 2 decimal places. a. Net present value b. Highest beta11:52 Investment Appraisal (Year 2 Column 2... 9% 5. Which of the following investments would you choose based on payback? Project 3 years 6 months 5 years 10 months C A В 2 years 8 months Project A Project B Project C 6. Discount Factor (5%) Year 0 -450,000 150,000 1.00 Year 1 0.952 Year 2 180,000 0.907 Year 3 250,000 0.864 Year 4 200,000 200,000 0.823 Year 5 0.784 ... Activity Chat Teams Assignments More