**10.1 Net present value:** Riggs Corp. management is planning to spend $650,000 on a new marketing campaign. They believe that this action will result in additional cash flows of $325,000 over the next three years. If the discount rate is 17.5 percent, what is the NPV on this project?**10.2 Net present value:** Kingston, Inc. management is considering purchasing a new machine at a cost of $4,133,250. They expect this equipment to produce cash flows of $814,322, $863,275, $937,250, $1,017,112, $1,212,960, and $1,225,000 over the next six years. If the appropriate discount rate is 15 percent, what is the NPV of this investment?**10.3 Net present value:** Crescent Industries management is planning to replace some existing machinery in its plant. The cost of the new equipment and the resulting cash flows are shown in the accompanying table. If the firm uses an 18 percent discount rate for projects like this, should management go ahead with the project?| Year | Cash Flow ||------|------------|| 0 | -$3,300,000|| 1 | 875,123 || 2 | 966,222 || 3 | 1,145,000 || 4 | 1,250,399 || 5 | 1,504,445 |**10.4 Net present value:** Management of Franklin Mints, a confectioner, is considering purchasing a new jelly bean-making machine at a cost of $312,500. They project that the cash flows from this investment will be $121,450 for the next seven years. If the appropriate discount rate is 14 percent, what is the NPV for the project?

Net present value is the sum of the present value of all the future cash flow minus the initial investment.Calculate the net present value as follows: Initial cost = $650,000 Cash flow = $325 ,000 Time = 3 years Net present value = cash flow 1(1+rate)1+cash flow 2(1+rate)2+cash flow 3(1+rate)3- Initial cost = 325,000(1+17.5%)1+325,000(1+17.5%)2+325,000(1+17.5%)3-650,000 = 325,000(1.175)1+325,000(1.175)2+325,000(1.175)3-650,000 = 325,0001.175+325,0001.3806+325,0001.622-650,000 = 276,595.7 + 235,400.6 +200,341 - 650,000 = $62,337.34Therefore, NPV is $62,337.34. Please post other question separately as these are unrelated.

Business

Finance

10.1 Net present value: Riggs Corp. management is planning to spend $650,000 on a new marketing campaign. They believe that this action will result in additional cash flows of $325,000 over the next three years. If the discount rate is 17.5 percent, what is the NPV on this project?

10.1 Net present value: Riggs Corp. management is planning to spend $650,000 on a new marketing campaign. They believe that this action will result in additional cash flows of $325,000 over the next three years. If the discount rate is 17.5 percent, what is the NPV on this project?

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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Net present value. Quark Industries has a project with the following projected cash flows: Initial cost: $280,000 Cash flow year one: $30,000 Cash flow year two: $80,000 Cash flow year three: $153,000 Cash flow year four: $153,000 a. Using a discount rate of 8% for this project and the NPV model, determine whether the company should accept or reject this project. b. Should the company accept or reject it using a discount rate of 15%? c. Should the company accept or reject it using a discount rate of 18%?
Can I get the answers to 10.11 and 10.12.
1. What is the profitability index of a project that costs $90,000 and returns $30,000 annually for 8 years if the opportunity cost of capital is 9.6%? a.0.64 b.0.80 c.1.76 d.1.05 e.1.26 2. King Corporation is planning a 15-year project with an initial investment of $2,013,000. The project will have $563,000 cash inflows per year in years 1-2; $166,000 cash inflows in years 3-10, and $57,000 cash inflows in years 11-15. Determine the project's internal rate of return (IRR). Using financial calculator a.6.87% b.5.72% c.4.58% d.10.30% e.8.24%
Please fully explain
4. Your firm is evaluating a project that should generate revenue of P4,600 in year 1, P5,200 in year two, P5,900 in year three, and P5,700 in year four. The firm receives each cash flow at the end of each year. If your firm's required return is 12%, what is the future value of these cash flows at the end of year four? a.P16,074.51b.P22,583.53c.P25,293.55d.P28,328.77
NPV (net present value) Craig is considering several capital investments for the upcoming year. Use the NPV (net present value) method to determine whether the company should investment in the following independent projects: Project 1 costs $28,000 and offers 8 annual cash flows of $8,600. Craig feels this type of investment should require an annual return of 16% on projects like this. Project 2 costs $35,000 and offers 6 annual cash flows of $12,000. Craig feels this type of investment should require an annual return of 12% on projects like this. Requirements 1. Calculate the NPV of both of these projects 2. What is the maximum acceptable price Craig should pay for each of these projects?
20. Horn Corporation is considering investing in a four-year project. Cash inflows from the project are expected to be as follows: Year 1, $2,000; Year 2, $2,200; Year 3, $2,400; Year 4, $2,600. If using a discount rate of 8%, the project has a positive net present value of $500, what was the amount of the original investment? * A. $1,411. B. $2,411. C. $7,054. D.$8,054.
28. Your restaurant’s new project, creating a gluten-free menu, is expected to have the following cash flows. The company requires a project to have a payback period less than 2 years. The company’s required rate of return is 18%. Year Cash Flows Cumulative cash flows 0 -$850,000 1 $300,000 2 $400,000 3 $500,000 What is the project’s net present value (NPV)? Group of answer choices –$4,173.5 $1,695,826.5 –$10,800.96 $4,173.5
24. You are evaluating a project that will cost $534,000, but is expected to produce cash flows of $128,000 per year for 10 years, with the first cash flow in one year. Your cost of capital is 11% and your company's preferred payback period is three years or less. a. What is the payback period of this project? b. Should you take the project if you want to increase the value of the company? a. What is the payback period of this project? The payback period is ____years. b. If you want to increase the value of the company you (will/will not) take the project since the NPV is (negative/positive) **round to two decimal places**
11. I need help with finance home work question A company is considering a 7-year project. At the beginning of the project, a cash outflow in the amount of $340,000 would be required. The company expects the project would generate cash inflows in the amount of $70,000 at the end of each of the project's 7 years. Assume the company requires a return of 8%. What NPV does the company expect for this project?
A firm is considering investing in a new project with an upfront cost of $300 million. The project will generate an incremental free cash flow of $50 million in the first year and this cashflow is expected to grow at an annual rate of 5% forever. If the firm's WACC is 11%, what is the value of this project? A. $833.3 million B. $875.0 million C. $575.0 million D. $533.3 million

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