A new computer system will require an initial outlay of $17,500, but it will increase the firm’s cash flows by $3,500 a year for each of the next 8 years. How high can the discount rate be before you would reject the project?
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A new computer system will require an initial outlay of $17,500, but it will increase the firm’s cash flows by $3,500 a year for each of the next 8 years. How high can the discount rate be before you would reject the project?
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- A new computer system will require an initial outlay of $15,000 but it will increase the firm's cash flows by $4,000 a year for each of the next 8 years. Is the system worth installing if the required rate of return is 8 percent? What if it is 13 percent? How high can the discount rate be before you would reject the project?A new computer system will require an initial outlay of $15,000 but it will increase the firm's cash flows by $4,000 a year for each of the next 8 years. Is the system worth installing if the required rate of return is 8 percent? What if it is 13 percent? How high can the discount rate be before you would reject the project? RépondreTransférerA new computer system will require an initial outlay of $19,000, but it will increase the firm’s cash flows by $3,800 a year for each of the next 8 years. How high can the discount rate be before you would reject the project? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places
- A new computer system will require an initial outlay of $19,000, but it will increase the firm’s cash flows by $3,800 a year for each of the next 8 years. Calculate the NPV and decide if the system is worth installing if the required rate of return is 9%. Calculate the NPV and decide if the system is worth installing if the required rate of return is 14%. How high can the discount rate be before you would reject the projectHow high can the discount rate be before you would reject the project? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Given: A new computer system will require an initial outlay of $14,950, but it will increase the firm’s cash flows by $3,300 a year for each of the next 6 years.A new computer system will require an initial outlay of $20, 500, but it will increase the firm's cash flows by $4, 800 a year for each of the next 6 years. Calculate the NPV and decide if the system is worth installing if the required rate of return is 8%. Note: Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to 2 decimal places. Calculate the NPV and decide if the system is worth installing if the required rate of return is 13% . Note: Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to 2 decimal places. How high can the discount rate be before you would reject the project? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.
- A new computer system will require an initial outlay of $19, 250, but it will increase the firm's cash flows by $4, 100 a year for each of the next 7 years. Calculate the NPV and decide if the system is worth installing if the required rate of return is 10%.A new computer system will require an initial outlay of $20,500, but it will increase the firm’s cash flows by $4,400 a year for each of the next 7 years. a. Calculate the NPV and decide if the system is worth installing if the required rate of return is 10%. (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to 2 decimal places.) b. Calculate the NPV and decide if the system is worth installing if the required rate of return is 15%. (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to 2 decimal places.) c. How high can the discount rate be before you would reject the project? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)You currently have $50,000 in cash. You have access to a project which requires an initial investment of $50,000. One year from now this project will pay either $40,000 with a probability 50% or $100,000 with probability 50%. After this, there are no further cash flows. Assume risk neutrality and an annual discount rate of 10%. This is also the risk-free rate. (d) You have found investors who will give you a loan for the full cost of the project. You will invest your cash at a risk-free rate. Assume in case of default, these investors can claim all of the project's cash flows, but cannot claim the cash you have invested outside of the project. What is the face value of the loan and the interest rate? How much money do you expect to have one year from now? (e) In light of your numerical answers above, discuss Modigliani and Miller's 1st proposition.
- You currently have $50,000 in cash. You have access to a project which requires an initial investment of $50,000. One year from now this project will pay either $40,000 with a probability 50% or $100,000 with probability 50%. After this, there are no further cash flows. Assume risk neutrality and an annual discount rate of 10%. This is also the risk-free rate. (a) What is the NPV of this project? (b) Suppose you decide to finance this project with your own cash. How much money do you expect to have one year from now? (c) You have found investors who will fund the full cost of the project through equity. You will invest your cash at a risk-free rate. What is the share of equity they will ask for? How much money do you expect to have one year from now? (d) You have found investors who will give you a loan for the full cost of the project. You will invest your cash at a risk-free rate. Assume in case of default, these investors can claim all of the project's cash flows, but cannot claim…Zuti has a capital investment project that could start immediately. The project will require a machine costing $2.4 million. The total discounted value now of the cash inflows from the project will be either $2.6 million or $1.9 million with equal probability. The risk-free rate is 3%. Instead of starting immediately the project could be delayed until one year from now to gain more market information. Its total discounted cash inflows at that time will be known as either $2.6 million, or $1.9 million, with certainty. (i) What is the present value of the option to delay? (ii) The supplier of the machine has offered to deliver it (if required) in one year's time at a price of only $2 million, if Zuti pays a non-refundable deposit now. What is the maximum the firm should pay as a deposit now? What type of real option does this represent for Zuti? Identify the specific components of the option contract.A new computer system will require an initial outlay of $16,250, but it will increase the firm's cash flows by $3,900 a year for each of the next 6 years. a. Calculate the NPV and decide if the system is worth installing if the required rate of return is 8%. Note: Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to 2 decimal places. Net present value Worth installing Yes b. Calculate the NPV and decide if the system is worth installing if the required rate of return is 13%. Note: Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to 2 decimal places.