Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Step 1
Initial Investment
The investment made at the start of a new project is known as an initial investment. When the initial amount is recovered, the project is successful. The initial investment helps the project get a loan during the start-up phase.
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- NPV and EVA A project cost $2.5 million up front and will generate cash flows in perpetuity of $240,000. The firm's cost of capital is 9%. a. Calculate the project's NPV. b. Calculate the annual EVA in a typical year. c. Calculate the overall project EVA. a. The project's NPV is $nothing. (Round to the nearest dollar.) b. The annual project EVA in a typical year is $nothing. (Round to the nearest dollar.) c. The overall project EVA is $nothing. (Round to the nearest dollar.)arrow_forwardA company is evaluating three possible investments. The following information is provided by the company: Project A Project B Project C Investment $238,000 $54,000 $238,000 Residual value 0 30,000 40,000 Net cash inflows: Year 1 70,000 30,000 100,000 Year 2 70,000 21,000 70,000 Year 3 70,000 17,000 80,000 Year 4 70,000 14,000 40,000 Year 5 70,000 0 0 What is the payback period for Project A? (Assume that the company uses the straight−line depreciation method.) (Round your answer to two decimal places.) A. 1.8 years B. 2.4 years C. 5.00 years D. 3.4 yearsarrow_forwardWhat is the payback period for an investment of $10000 with net revenues as follows: year 1: $5000, Year 2: $3000, Year 3: $2000, Year 4: $5000, Year 5: $3000. A. 2 years B. 3 years C. 4 years D. 5 yearsarrow_forward
- am.401.arrow_forwardA proposed project is expected to increase accounts receivable by $25,000, decrease inventory by $8,000 and increase accounts payable by $16,000. What is the project's initial requirement for net working capital? Select one: a. +$17,000 b. $1000 c. -$9,000 d. +$9,000arrow_forwardAn investment project that gives cash flow for the first year $ 10,000 and the second $ 15,000; The interest rate is 8.5%; The present value of the investment is equal to (to the nearest decimal place): Select one: a. $ 25,000 b. $ 21929 c. $ 30,000 d. $ 20,000arrow_forward
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